Research: Moody's assigns B2 insurance financial strength ratings … – Moody's

London , March 31, 2022 – Moody’s Investors Service (“Moody’s”) has today assigned B2 local currency (LC) and foreign currency (FC) insurance financial strength ratings (IFSR) to ALFA INVEST SUG’URTA KOMPANIYASI JSC (Alfa Invest). The outlook is stable.
Alfa Invest, founded in 2003, is an insurance company providing retail and commercial property and casualty (P&C) insurance, life insurance and reinsurance products in Uzbekistan.
A list of affected ratings can be found at the end of this press release.
RATINGS RATIONALE
The B2 rating on Alfa Invest reflects the group’s good position in the growing Uzbek insurance market, a diversified product mix, strong capitalisation relative to the underwriting risk assumed and good historic performance. These strengths are offset by the group’s operations in a single and small market, and exposure to non-investment grade financial assets. In particular, Alfa Invest’s excessive equity concentration to a single privately owned commercial Uzbek bank further amplifies investment, earnings and capital risks.
Alfa Invest has been ranked among the top 10 largest insurer in Uzbekistan with a market share of around 5-7% in recent years. The group’s good position in its domestic insurance market is supported by its nationwide presence and a rapidly growing general insurance market.
The group’s capital, comprised of UZS90 billion of equity (USD8.6 million) as at YE2020, is strong relative to underwriting risks assumed, as reflected in the group’s gross underwriting leverage (gross premiums and reserves as a percentage of equity) metric of 1.2x. Moody’s expects this ratio to remain strong even as the group’s premiums continue to grow. The group’s total assets as a percentage of equity were also a very healthy 49% as at YE2020.
Constraining the rating however is the group’s significant investment risk. In addition to its exposure to domestic banks via cash deposits, Alfa Invest has an excessive equity concentration to a single commercial bank based in Uzbekistan. While the group’s equity stake in this bank has yielded very strong investment returns prior to the pandemic, supporting the group’s overall good performance, in Moody’s view, this exposure amplifies the group’s credit, market and liquidity risks.
The group’s limited access to capital market is another rating constraint. However, Moody’s notes that Alfa Invest has a broad range of shareholders including institutional and private individual investors, which have voluntarily injected equity into the company in recent years, amounting to total UZS28 billion (USD2.6 million) between 2019 and 2020. However, the Rating Agency notes that this is more than offset by total dividend payments of UZS40 billion (USD 3.8 million) in the same period.
The assignment of the new ratings to Alfa Invest also takes into account the effectiveness of its governance as part of Moody’s assessment of environmental, social and governance (ESG) considerations. Moody’s does not have any particular governance concerns for the company.
STABLE OUTLOOK
The rating outlook on Alfa Invest is stable. This reflects Moody’s expectation that Alfa Invest will maintain its strong level of capital as it continues to grow the premium base.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Moody’s could upgrade the insurer’s ratings if: (1) there is a significant change in the group invested asset portfolio which reduces its concentration risk and exposure to Uzbek banks and below investment grade financial assets; (2) there is a material improvement in Uzbekistan’s insurance operating environment; (3) the capital position relative to underwriting and investment risk strengthens significantly; and/or (4) the group develops a track record of sustainable profitable underwriting performance and a good understanding of large commercial underwriting exposures
Conversely, downward pressure would arise on the insurer’s ratings in the event of: (1) a deterioration in the credit quality of the group’s invested assets; (2) a downgrade of the B1 rating on the government of Uzbekistan; (3) a significant sustained deterioration in profitability; (4) a material reduction in capital relative to the group’s underwriting risks and investment exposures; and/or (5) a meaningful loss of market share.
ASSIGNED RATINGS
..Issuer: ALFA INVEST SUG’URTA KOMPANIYASI JSC
Assignments:
….Local Currency Insurance Financial Strength Ratings of B2
….Foreign Currency Insurance Financial Strength Ratings of B2
Outlook Action:
….Outlook assigned is Stable
PRINCIPAL METHODOLOGIES
The methodologies used in these ratings were Life Insurers Methodology published in September 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1254133 , and Property and Casualty Insurers Methodology published in September 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1254163 . Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.
REGULATORY DISCLOSURES
For further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004 .
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235 .
At least one ESG consideration was material to the credit rating action(s) announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.


Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Helena Kingsley-Tomkins
VP-Senior Analyst
Financial Institutions Group
Moody’s Investors Service Ltd.
One Canada Square
Canary Wharf
London
United Kingdom
JOURNALISTS : 44 20 7772 5456
Client Service : 44 20 7772 5454

Antonello Aquino
Associate Managing Director
Financial Institutions Group
JOURNALISTS : 44 20 7772 5456
Client Service : 44 20 7772 5454

Releasing Office :
Moody’s Investors Service Ltd.
One Canada Square
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JOURNALISTS : 44 20 7772 5456
Client Service : 44 20 7772 5454

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