Tashkent, Uzbekistan (UzDaily.com) — The rating agency Moody’s has assigned Uzagrosugurta JSC a Ba3 insurance financial strength rating in both local and foreign currencies, as well as a Baseline Credit Assessment (BCA) rating of b2 with a "stable" outlook.

The Ba3 rating of Uzagrosugurta is based on the company’s BCA of b2 and an upgrade of two notches, as the agency considers the likelihood of support from the Government of Uzbekistan (Ba3, stable outlook) to be "high." This assessment is reinforced by the 99.6% government ownership stake in Uzagrosugurta, as well as its political role and significance to the country’s agricultural sector, in addition to previous examples of state support.

The BCA of Uzagrosugurta at b2 reflects: (i) the company’s strong market position, ranking 6th among the largest insurers in Uzbekistan by gross premiums in property and casualty (P&C) insurance in 2024, (ii) diversification of its product portfolio, (iii) stable profitability, (iv) good capital adequacy combined with underwriting risks, and the use of reinsurance, which helps minimize underwriting losses.

However, the rating also considers the company’s high concentration in a single, albeit growing, market and an economy with a volatile agricultural sector, as well as its significant exposure to assets below investment grade.

The Government of Uzbekistan has expressed its intention to privatize Uzagrosugurta as part of a broader strategy for privatizing state-owned enterprises and attracting foreign investment. However, the agency expects that the government will remain the primary shareholder of Uzagrosugurta for at least the next 12-18 months.

Founded in 1997, Uzagrosugurta plays a key role in insuring Uzbekistan’s agricultural sector, which is an important part of the national economy. The company’s strong position in the domestic insurance market is supported by its wide presence across the country. Despite limited geographical diversification, as most premiums are collected within Uzbekistan, the company’s product portfolio is well-diversified across business lines.

Nonetheless, the company has significant exposure to risks associated with commercial properties and more risky credit insurance, which in turn leads to a high dependence on the unstable agricultural sector. The lack of granularity in commercial risks is partially offset by the use of reinsurance, which helps reduce potential losses.

The overall quality of Uzagrosugurta’s assets is characterized by a high concentration of investments in local assets, primarily current accounts and deposits in state-owned banks rated Ba3. As of the end of 2023, real estate accounted for about 55% of the company’s total assets. The agency does not expect significant changes in the investment portfolio structure over the next 12-18 months.

As of the end of 2023, Uzagrosugurta’s consolidated capital amounted to 305 billion soums, which was sufficient to cover underwriting risks, as evidenced by a gross underwriting ratio of 1.57x. The company’s equity significantly increased in 2022 as a result of a revaluation of fixed assets, reaching 307 billion soums, or 86% of equity at the end of 2022.

Uzagrosugurta’s credit profile benefits from its history of profitable operations, with an average return on equity of 3.76% for 2021-2023, supported by underwriting and investment results. In 2024, the company reported a net profit of 22 billion soums according to local Generally Accepted Accounting Principles (GAAP). The company’s ratings also reflect its effective management, which is a key factor in its evaluation based on environmental, social, and governance (ESG) risk methodology. Uzagrosugurta shows moderate exposure to corporate governance risks (G-3), supported by its conservative financial strategy, risk management system, and experienced leadership. The main governance risk is ownership concentration, as 99.6% of the company is owned by the Government of Uzbekistan.

The stable outlook is based on the stable Ba3 rating of the Government of Uzbekistan and expectations that government support, if needed, will remain in place over the next 12 months. The company is also expected to maintain profitability, asset quality, capital adequacy, and liquidity without deterioration.

Uzagrosugurta’s ratings at the current level align with the sovereign debt rating of Uzbekistan (Ba3), which limits the possibility of a rating upgrade in the near term. The BCA of Uzagrosugurta could be upgraded if the company significantly improves profitability in insurance and expands its geographical diversification.

However, the ratings could face downward pressure if Uzagrosugurta is sold to a company with a weaker credit profile than that of the Government of Uzbekistan, or with a lower willingness to support the insurer, or if the credit profile of the Uzbek government deteriorates.

Additionally, a significant deterioration in the company’s standalone credit profile could also negatively impact its ratings.