AM Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating of B (Fair) and the Long-Term Issuer Credit Rating of “bb+” (Fair) of JSC Insurance Company Aldagi Group (Aldagi) (Georgia).

The Credit Ratings (ratings) reflect Aldagi’s balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, limited business profile and marginal enterprise risk management.

The revision of the outlooks to positive from stable reflect the improvement of Aldagi’s balance sheet strength fundamentals and the enhanced financial stability of the company’s ultimate parent, Georgia Capital PLC. AM Best expects that Aldagi will maintain its risk-adjusted capitalisation comfortably at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by prudent capital and underwriting management. Furthermore, the risk of material capital extractions due to Aldagi’s association with its ultimate parent, has been reduced as the latter has improved its financial stability.

Aldagi’s balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by BCAR. The assessment also considers Aldagi’s liquid investment portfolio and moderate dependence on reinsurance, with its reinsurance panel consisting of international companies of high financial strength. Offsetting factors include the company’s onerous dividend policy, which limits the internal capital generation, as well as Aldagi’s exposure to the moderate political and high economic and financial system risks in Georgia.

Aldagi has a track record of strong operating performance and in 2023 (under IFRS 17), generated a return-on-equity ratio of 23.6% and a net-net non-life combined ratio of 95.4% (both as calculated by AM Best). Underwriting results have benefited from Aldagi’s prudent approach to risk selection and focus on profitability over top-line growth. In 2023, the company reported insurance service result of GEL 37.7 million (approximately USD 14.4 million) (2022: GEL 41.0 million, approximately USD 14.1 million). Aldagi’s net investment returns contribute positively to its operating profitability but have been somewhat volatile over the recent years owing to the high interest rate environment in Georgia and internationally, as well as movements in the fair value of invested assets.

Aldagi is one of the largest insurance companies in Georgia, with a market share of approximately 17%, based on 2023 combined non-life and life market premiums. The company benefits from its strong brand and multichannel distribution network. Nevertheless, Aldagi’s business profile is constrained by its geographical concentration and the small size of its portfolio by international standards. In 2023, the company reported insurance revenue of GEL 160.4 million (approximately USD 60 million). Aldagi’s top line is expected to grow in the medium term as the company starts to participate in the local compulsory motor third-party liability insurance pool, as well as write facultative reinsurance business domestically and in regional foreign markets. AM Best will continue to monitor the progress of the company’s growth strategy.

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 use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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