S&P names Azerbaijan's property/casualty insurance market leader for next 2 years

S&P Global Ratings expects that PASHA Insurance will maintain its strong competitive position in Azerbaijan's property/casualty (P/C) insurance market in the next two years, Report informs.

S&P today upgraded its long-term issuer credit and financial strength ratings on Azerbaijani company PASHA Insurance to 'BB+' from 'BB'. The outlook is stable.

“PASHA Insurance is the clear market leader, benefiting from its expertise, brand awareness, and diversified business mix. It also benefits from strong distribution networks that facilitate direct sales. With Azerbaijani new manat (AZN) 264 million (approximately $155 million) of GWP over the first 10 months of 2024 based on local accounting standards, PASHA Insurance ranks No. 1 in the country's P/C market. It has about a 53% market share in 2024 (up from 49% in 2023), which we expect it will maintain over the next two years,” S&P Global Ratings said.

S&P expects PASHA Insurance's capital adequacy will remain sustainably above 99.8% according to our capital model in 2024-2026. This will be supported by solid profitability with return on equity exceeding 30%, and retention of at least part of its net profit (up to 20%-25%).

“We factor a moderation of average growth rates of 10%-15% per year in 2025-2026 into our analysis, in terms of insurance revenue, which should support capitalization. We consider that according to local accounting standards, the company's gross written premium (GWP) increased by only 4% over the first 11 months of 2024 compared to a substantial 34% expansion in 2023,” S&P said. “We also view that in 2024 the company started managing its capital adequacy in accordance with Solvency II directive (for internal capital management purposes), which will support its capital buffers build up, in our view.”

According to the American credit rating agency, the absolute size of capital remains moderate in the international context (below $100 million in the forecast horizon):

“That said, the company mitigates its single-event losses exposure via a high-quality reinsurance panel, which provides substantial capacity.”

“We anticipate that PASHA Insurance will maintain its asset mix and 'BB+' credit quality of investments while improving diversification. As of November 30, 2024, about 67% of the company's investments were presented by sovereign and quasi-sovereign bonds, including government bonds of the Republic of Azerbaijan (BB+/Stable/B) and a minor portion of international government bonds of 'AA' credit quality,” S&P said.

The credit rating agency further said, “we could take a positive rating action thereafter if the company builds up its capital while increasing the diversification of its insurance and investment operations to foreign markets to pass our sovereign stress test.”