2012-12-12 14:45:17 -
A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of B (Fair) and issuer credit rating of “bb+” of OJSC Transsiberian Reinsurance Corporation (Transsib Re) (Russia). The outlook for both ratings remains stable.
The ratings of Transsib Re continue to reflect its excellent risk-adjusted capitalisation and good, albeit subdued operating performance, pressured by declining business volumes. These strengths are partly offset by the high execution risk and limited expertise relating to Transsib Re’s international business expansion. The ratings also reflect the company’s exposure to the high political and financial system risks associated with its core markets.
Transsib Re’s level of risk-adjusted capitalisation is strong and supportive of its current ratings and is expected to remain supportive of its
business plans in 2013. The amount of share capital was increased in 2011 to RUB 481.2 million from RUB 181.2 million, driven by changes in Russian insurance regulations regarding minimum capital requirements for reinsurance companies. Transsib Re achieved the raise in chartered capital through earnings retention and an additional capital injection.
In 2011, Transsib Re produced good operating results reflected in a profit after tax of RUB 25.6 million (2010: RUB 39.7 million). The contribution from the technical account to overall profits has declined over the past two years caused by the decline in net earned premiums, while incurred claims and management expenses slightly increased. The decline in premiums was driven by the loss of business from Kazakhstan due to regulatory changes and cancellations of unprofitable business, especially relating to motor lines. Transsib Re anticipates returning to growth in 2012 and 2013, alleviating pressures on the company’s technical results. Despite Transsib Re’s weakening position, the company remains a strong player in the Russian specialist reinsurance market.
Due to declining premium volumes in Russia and the Commonwealth of Independent States, the company continues to focus on international growth. At year-end 2011, Transsib Re collected more than 60% of gross written premium from outside Russia. Transsib Re has no significant market share in any of its overseas markets, and the company’s limited expertise relating to these territories has exposed it to high losses in the past. Although Transsib Re maintains exposure to countries which A.M. considers to have high political and financial system risk, this exposure is somewhat tempered by the spread of the company's geographical diversification.
Positive rating actions could occur if Transsib Re would profitably expand its underwriting portfolio while maintaining risk-adjusted capitalisation at a strong level over the longer term.
Negative rating actions could occur if Transsib Re’s technical performance was to remain weak. Risk-adjusted capitalisation falling below a level considered supportive of its current rating level also would put negative pressure on the ratings.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M.
Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilised include.
“Catastrophe Analysis in A.M. Best Ratings”; “Evaluating Country Risk”, “Risk Management and the Rating Process for Insurance Companies”; and “Understanding Universal BCAR”. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..
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Best Europe - Rating Services Limited Supplementary Disclosure : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..
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