Tashkent, Uzbekistan (UzDaily.com) —  Moody’s Ratings (Moody’s) has upgraded the local currency (LC) Insurance Financial Strength Rating (IFSR) of Uzbekinvest a.s. (Uzbekinvest) to Ba2 from Ba3 and its Baseline Credit Assessment (BCA) to ba2 from ba3. At the same time, we affirmed the company’s Ba3 foreign currency (FC) IFSR. The outlook has been changed to stable from positive.

The upgrade of Uzbekinvest’s LC IFSR to Ba2, one notch above the Government of Uzbekistan sovereign rating (Ba3 stable), reflects its large investment portfolio of high quality outside of Uzbekistan and is driven by the improvement of the company’s credit profile, notably its profitability, business diversification and geographic mix as a result of Uzbekinvest’s increased focus on international reinsurance market in recent years. Uzbekinvest’s premiums derived from the international reinsurance business materially increased in recent years to around 50% of its total premiums by the end of 2023 and the company will likely sustain this level of diversification in the next 12-18 months.

Uzbekinvest’s credit profile is stronger than that of the Uzbek government because its large investment portfolio, held by its UK subsidiary, Uzbekinvest International Insurance Company Ltd (UIIC), includes high quality US denominated fixed income securities rated Baa-Aaa and accounted for over 40% of the group’s financial assets and over 50% of the group’s shareholder’s equity as at year-end 2023.

In 2023, Uzbekinvest’s diversification into reinsurance had positive impacts on the company’s results. However this benefit is partly offset by higher exposure to large risks and can bring losses if international expansion is not prudently managed, because the reinsurance business is by nature very volatile.

Uzbekinvest reported net profit of UZS75 billion in 2023, up from UZS4 billion in 2022 translating to Return on Average Capital (ROC) of around 7% (0.4% in 2022). For 9M2024, Uzbekinvest posted a local GAAP net profit of UZS25 billion, a 40% increase from 20 billion reported for 9M2023. Uzbekinvest’s financial results were supported by higher underwriting and investment results amid strong pricing on the international reinsurance markets.

At the same time, Uzbekinvest’s IFSR remains underpinned by the group’s strong market position in the domestic insurance sector as the second largest property and casualty insurer in terms of gross premiums in Uzbekistan.

Uzbekinvest’s capital of UZS1.13 trillion as at year-end 2023 was good in light of underwriting risks assumed, as reflected in its gross underwriting leverage metric (gross premiums and reserves as a percentage of equity) of 1.01x and its shareholders’ equity remains above 40% of its total assets on a sustained basis.

Uzbekinvest’s FC IFSR Ba3 is affirmed and remains constrained by Uzbekistan’s FC country ceiling.

The stable outlook reflects our expectation that the group’s credit profile will remain broadly stable in the next 12-18 months, supported its strong asset quality and capital position, while its strengthened business and geographical diversification will continue to support Uzbekinvest’s profitability. The stable outlook is also consistent with the stable outlook on the Uzbekistan sovereign rating.

Any positive ratings action on Uzbekinvest’s ratings would be driven by a higher sovereign rating and country ceiling. Conversely, the ratings could face downward pressure in case of a significant deterioration in the company’s capitalization, a weakening of its asset quality, or significant deterioration in the economic environment in Uzbekistan.