November 30, 2017 / 1:48 PM / a year ago

Fitch Revises AzInsurance's Outlook to Negative; Affirms at IFS 'B'

(The following statement was released by the rating agency) MOSCOW, November 30 (Fitch) Fitch Ratings has revised AzInsurance OJSC's (AzInsurance) Outlook to Negative from Stable. At the same time, Fitch has affirmed AzInsurance's Insurer Financial Strength (IFS) Rating at 'B'. KEY RATING DRIVERS The revision of the Outlook reflects AzInsurance's weak business profile and low resilience to a difficult operating environment in Azerbaijan, deteriorated financial performance in 9M17 and the lack of distinctive competitive advantages. The affirmation of the rating reflects AzInsurance's strong regulatory capital position. The operating environment is challenging in Azerbaijan with continued risks and uncertainty around the macroeconomic and financial sector adjustment currently underway. Policy credibility continues to be tested by the fallout from low oil prices. The impact of a mishandled devaluation is still reverberating across the economy. AzInsurance is a medium-sized insurer and is ranked sixth on the Azerbaijani non-life and life insurance markets, with gross written premiums of AZN17 million in 9M17, after adjusting for inwards reinsurance and early policy terminations. Fitch believes that the company has no distinctive competitive advantages that could support an improvement of its financial performance or boost business volumes. In 3Q17, in response to the weaker economic environment, AzInsurance decided to launch a new business plan. The company intends now to optimise its business processes through digitalisation, reduce its cost base and diversify its insurance product mix through product innovation. However, Fitch views this business strategy as challenging to implement successfully. In Fitch's view, AzInsurance faces challenges in finding a stable market position and implementing the strategic steps that could make the company more resilient to the operating environment. AzInsurance is in compliance with regulatory solvency requirements. The regulatory solvency margin, calculated according to the Solvency-I like formula, was a strong 281% at end-9M17 compared with 341% at end-2016. Historically, AzInsurance's shareholder repatriated nearly 100% of its net profits in the form of dividends. However, in 2016-9M17, AzInsurance paid out 22% and 48% of prior year net profit. Fitch understands from management that AzInsurance's shareholder has decided to reduce the sum of expected dividends to maintain the company's sound capitalisation. This decision should support the company throughout the restructuring of its business. In 9M17 AzInsurance reported a net loss of AZN4.8 million, which was adversely impacted by a worsened underwriting result and, to a lesser extent, by FX losses on investments. The underwriting loss of AZN4 million was driven by increased administrative expenses stemming from the restructuring. In 2016 AzInsurance reported a net profit of AZN2.3 million compared with a net profit of AZN18.5 million in 2015. As in 2015, the 2016 net result was mainly driven by FX gains on investments of AZN4.9 million (2015: AZN10.4 million). Adversely the net result was impacted by negative underwriting profitability. AzInsurance reported an underwriting loss of AZN3.8 million in 2016. AzInsurance's portfolio contains significant concentrations in single counterparties. Cash and bank deposits with sister AFB Bank ASC accounted for 47% of the insurer's investments at end-9M17 (end-2016: 28%). RATING SENSITIVITIES Capital depletion due to investment or operating losses could lead to a downgrade of AzInsurance's rating. Successful implementation of the new business plan, resulting in improved financial performance, could lead to a revision of the Outlook to Stable. Contact: Primary Analyst Anastasia Surudina Analyst +7 495 956 5570 Fitch Ratings CIS Limited Valovaya Street, 26 Moscow 115054 Secondary Analyst Stephan Kalb Senior Director +49 69 768076 118 Committee Chairperson Federico Faccio Senior Director +44 20 3530 1394 Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email: Additional information is available on Applicable Criteria Insurance Rating Methodology (pub. 26 Apr 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below