22 Jul 2010 09:55

Moody's affirms Baa1 and Aaa.ru Insurer Financial Strength ratings on ROSNO with a stable outlook

LONDON. July 21 (Interfax) - Moody's affirmed on Wednesday its Baa1 and Aaa.ru insurance financial strength ratings for OAO Rosno with a stable outlook, the agency said in a statement.

The statement said: "The ratings reflect the support provided to Rosno by 100% owner Allianz SE (rated Aa3 for financial strength and senior debt). The rating also reflects the company's good position in the Russian P&C market, its high degree of business diversification and a well-developed distribution network. This is offset by an asset allocation strategy which resulted in significant losses in 2008, high expense ratio and dependence on the rapidly evolving Russian P&C market for profitability. Rosno is an operating entity writing non-life insurance, as well as a holding company owning stakes in a number of subsidiaries, including ROSNO-Center (a reinsurer), Medexpress, ROSNO MS, Allianz ROSNO Asset Management and Allianz Ukraine, among others. The Group's business consists mainly of motor insurance (34% of gross written premium in 2009), voluntary medical insurance (27%) and property insurance (21%).

"Rosno showed significant operating performance improvement in 2009 when it recorded a net profit of Roubles 745 million, up from a net loss of Roubles 2,305 million in 2008. Rosno benefited from a de-risked investment portfolio following the sale of its equity investments in 2008, and from improvements to the insurance underwriting result as Rosno took steps to improve premium rates and remove unprofitable business. The removal of unprofitable business also saw premium income decline to Roubles 22,865 million from Roubles 24,689 million in 2008, although the income fall was also partly due to a contraction of the market as a whole. Moody's expects premium levels to recover in 2010 and onwards as the economic environment in Russia improves. In Moody's view capitalisation is low by international standards, but is high in comparison to Russian peers. The ratings on Rosno also incorporate a significant level of support from Allianz SE.

"Allianz demonstrated this support in 2008 and 2009 through significant capital injections to support the company during the economic downturn and to fund future growth. Allianz also provides significant reinsurance protection to Rosno and technical expertise. The rating carries a stable outlook however an upwards rating action is possible if there are substantial improvements in the stand-alone credit fundamentals, primarily underwriting performance and capitalisation or sustained improvements in the Russian insurance operating environment. Conversely, negative rating action may occur from reductions in the support assumptions from Allianz, or through a deteriorating economic environment in Russia, evidenced by negative rating actions on the Russian Government. The last rating action on Rosno was on 30th March 2007 when the rating was upgraded to Baa1

The following ratings were affirmed with a stable outlook:

OAO Rosno

Insurer Financial Strength Baa1

National Scale IFSR Aaa.ru"