The FINANCIAL -- Moody's Investors Service announced on October 27 that it had assigned a first-time insurance financial strength rating of B2 to International Insurance Company (IIC).

The rating outlook is stable. International Insurance Company is an Azerbaijan based insurer primarily focused on corporate and retail non-life insurance within Azerbaijan. It is 100% owned by the International Bank of Azerbaijan (IBA;
Baa3/Negative/NP), itself 50.2% owned by the Government of Azerbaijan.

IIC was originally formed in 2002 to act as an insurance provider for the assets against which IBA made loans. The strategy has since been expanded to provide insurance products outside of the IBA branch network. IIC is the 4th largest insurance company in Azerbaijan with total premiums of AZN 13.6mn in 2008 (US$ 17mn) and total assets of AZN 27.3mn (US$ 34mn). It is licensed to write 33 types of insurance but is predominantly focused on motor insurance and medical insurance.

The rating is based on IIC's strong capital relative to the insurance risks taken, good business position as the 4th largest insurer in Azerbaijan, and good asset quality, with limited exposure to high risk assets, although bank deposits carry some risk. Offsetting these strengths, the operating performance is weak, with the company reporting a net loss in 2008 and poor underwriting performance, due to a very high expense ratio. In addition the company is highly exposed to the economy of Azerbaijan (Ba1/Stable), and the company's small size increases potential exposure to concentration risks.

Moody's said that upward rating pressure for IIC may evolve over time from 1) a significant improvement in the operating performance of IIC, with several years of strong underwriting profitability 2) improvement in the Azerbaijan economic and Sovereign environment, evidenced by an upgrade in the Government rating or 3) through enhanced support from the International Bank of Azerbaijan or the Government

On the other hand, the rating may experience downward pressure from

1) a deterioration in the Sovereign environment or reductions in loan volumes at IBA impacting premium levels,

2) protracted poor claims environment resulting in continued underwriting losses or

3) an increased investment risk such as investments in illiquid assets or volatile equities

The following rating was assigned:

International Insurance Company OJSC -- B2 insurance financial strength rating, stable outlook.

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