30 August 2017 - 15:52

Razi Attains Long-Term Financial Strength +B

Capital Intelligence credit ratings agency declared Razi Insurance Company’s outlook has reached a positive level and achieved +B rating.
News ID : 74277
 قهرمانی تیم کشتی بیمه رازی برای سومین بار

CI Ratings has also revised the outlook to ‘Positive’ from ‘Stable’ for the Long-Term IFSR for Razi Insurance Company based in Tehran.

At the same time, the company’s Long- and Short-Term IFSRs were affirmed at ‘B+’ and ‘B’, respectively.

The rating mainly reflects Razi’s improved market position as well as the company’s reduced investment concentration risk.

CI Ratings could consider a further positive change in the ratings, should Razi sustain this progress, demonstrate further improved underwriting results and sufficient financial flexibility to attract the capital necessary to fund the planned high growth and successfully reduce its substantial premium receivables.

Higher insurance demand and improved operating performance caused by significant improvements in the operating environment are also additional supporting factors.

CI Ratings expects Razi to benefit from potential economic improvements that lead to higher insurance demand.

In fact, Razi can capitalize on its improving position and a relatively low-complexity business model, based on its focus on appropriate retail insurance products, good services and sound market reputation.

The company’s continued growth story starts to show positive results in terms of economies of scale, including improved cost efficiency. A constraining factor remains Razi’s over-proportional exposure to the very competitive motor third-party liability business (or personal auto policies).  

Although recently improved, the concentration of Razi’s investments on banks and real estate continues to be a constraining factor. In the view of CI Ratings, this partially reflects the lack of depth, breadth and liquidity of local capital markets, but also the company’s desire to generate higher returns to compensate for weak underwriting profitability.

About 56% of Razi’s investments (representing 65% of shareholders’ funds) at the end of the fiscal 2016 were short-term deposits with Iranian banks. Importantly, however, the significant concentration on a single obligor (Ayandeh Bank) has reduced significantly in the course of 2017-18.

Furthermore, Razi’s investments in real estate (branches and project developments) reduced significantly at the end of the fiscal 2016 through the sale of properties, but still represented 34% of the company’s investments.

Razi has recently decided to affect a significant capital increase by 3-5 trillion rials ($77.7 million-$129 million) in order to fund its ongoing growth while also supporting its current Level 1 regulatory solvency. However, in the view of CI Ratings, in light of Razi’s expected substantial growth and limited earnings retention capacity, the company will have to rely on regular capital increases.


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