Fitch said: "The rating reflects high investment risk on AzInsurance's balance sheet, the correspondingly weak capital position on a Fitch risk-adjusted basis, demanding profit repatriation by its shareholder, and material exposure to catastrophe risk. The rating also takes into account of a strong market position and related strong profitability, mainly from AzInsurance's core insurance operations.

"AzInsurance has significant concentration risk. Cash and bank deposits with related party banks accounted for 56% of AzInsurance's investments at end-2014, leading to high affiliated investment leverage of 69%. The other significant concentration is the covered bonds of Azerbaijan Mortgage Fund (BBB-/Stable), a government agency, which represented 31% of the insurer's investments at end-2014.

"AzInsurance is owned by a local businessman and benefits from its strong ties with Gilan Holding, a large diversified local group managing projects in 

construction, banking, tourism and other industries. The insurer holds an exclusive position in a few segments of the local insurance sector and has high 

bargaining power. This exclusive position translates into strong underwriting profitability. In 2010-2014 its average combined ratio was 51%, supported by 

low acquisition costs. Its return on average equity (ROAE) for this period was a strong 53%, driven by underwriting profit, albeit declining to 35% by 2014."