LONDON--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of �bbb-� of AzRe Reinsurance, OJSC (AzRe) (Azerbaijan). The outlook of these Credit Ratings (ratings) is positive.

The ratings reflect AzRe�s balance sheet strength, which AM Best categorises as very strong, as well as its strong operating performance, limited business profile and marginal enterprise risk management (ERM).

The positive outlooks reflect the continued resilience of AzRe�s balance sheet strength amid a challenging operating environment, combined with improvements in the company�s ERM capabilities.

AzRe�s balance sheet strength is underpinned by its consolidated risk-adjusted capitalisation that is at the strongest level, as measured by Best�s Capital Adequacy Ratio (BCAR), as well as good quality retrocession and a conservative investment portfolio by asset type. An offsetting factor is the company�s exposure to catastrophe losses due to earthquake risk in Azerbaijan. In addition, AzRe is exposed to the high financial system risk in the country, resulting in its bond portfolio being primarily of vulnerable credit quality. AzRe does not have a formal dividend policy, although AM Best expects any future dividend payouts to be moderate and allow the company to maintain its strongest risk-adjusted capitalisation.

AzRe has achieved strong operating results in recent years, as demonstrated by a five-year weighted average combined ratio of 52.8% and a return on equity of 24.4% (2015�2019). Operating performance benefits from relatively low loss ratios in Azerbaijan, and from high investment yields reflective of the country�s high interest rate environment. Results for the first nine months of 2020 remained good, with each (re)insurance subsidiary of AzRe reporting an operating profit. Prospective performance may be subject to volatility due to potential exposure to large losses and the evolving operating environment in Azerbaijan.

AzRe is one of the leading players in the local (re)insurance market where it benefits from its profile as Azerbaijan�s only specialised reinsurer. Negatively affecting AM Best�s assessment of the company�s business profile is its highly concentrated portfolio, by geography and line of business, with a significant share of gross written premium derived from personal accident business, as well as its small size by international standards. AzRe has taken steps to improve its portfolio diversification by developing direct life and non-life insurance through subsidiaries, expanding in foreign markets and targeting new reinsurance segments in the domestic market.

AzRe�s ERM framework is evolving with certain elements yet to be implemented. The company has taken steps to strengthen its ERM in recent years, with a focus on capital management, formalised risk tolerances and stress testing.

This press release relates to Credit Ratings that have been published on AM Best�s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best�s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best�s Credit Ratings. For information on the proper media use of Best�s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best�s Credit Ratings and AM Best Rating Action Press Releases.

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Contacts

Todor Kitin
Financial Analyst
+44 20 7397 0335
[email protected]

Valeria Ermakova
Associate Director, Analytics
+44 20 7397 0269
[email protected]

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
[email protected]

Jim Peavy
Director, Communications
+1 908 439 2200, ext. 5644
[email protected]