June 5, 2017 / 2:42 PM / 4 months ago

Fitch Rates Russia's RNRC 'BBB-'; Outlook Stable

(The following statement was released by the rating agency) LONDON, June 05 (Fitch) Fitch Ratings has assigned Joint Stock Company Russian National Reinsurance Company (RNRC) an Insurer Financial Strength (IFS) rating of 'BBB-'. The Outlook is Stable. KEY RATING DRIVERS The rating reflects RNRC's 100% ownership by the Central Bank of Russia, which has issued a capital support agreement in its favour. RNRC's rating also benefits from a strong business profile underpinned by specific legislation, management expertise, and a conservative investment strategy. Offsetting these positive rating factors is RNRC's exposure to concentration risk in the short-term as the reinsurer expands its portfolio away from sanctioned risks. RNRC is a reinsurance company founded in August 2016 to develop the local reinsurance market in Russia and to reinsure risks assumed by local insurance companies related to sanctioned businesses. Regulations oblige local primary insurers to offer 10% of reinsured business to RNRC. It is, however, only obliged to accept risks related to sanctioned businesses. Commitment from the Central Bank of Russia to support the company is evidenced by a capital support agreement dated May 2017 by further capital injections on the maximum amount of RUB49.7 billion. This was to cover equity decrease below RUB21.3 billion due to losses occurring under sanctioned business agreements. Reinsurance of Russian sanctioned business is one of the areas RNRC works in under the law based on which the company was established. It includes reinsurance of property, cargo or marine risks related to military and double-use products and industries, reinsurance of risks underwritten in Crimea, and some one-off large projects. The share of sanctioned business in RNRC's portfolio is forecast not to exceed 10%-15% by 2021, assuming stable absolute amounts of sanctioned business and the growth of RNRC's non-sanctioned insurance portfolio. Fitch views RNRC's role as reinsurer for sanctioned risks as positive for the company's strategic value to the Russian Federation and Central Bank of Russia. RNRC's management team possesses extensive expertise and deep knowledge of the insurance industry. Most of the managers have a long track record of experience working in leading Russian insurance companies, including companies focused on corporate business. Fitch believes that the expertise of the company's management will be beneficial for the development of the company and will allow it to reach the strategic goals set by the shareholder. Based on the business plan for 2017-2021, RNRC is expected to be profitable with a return on equity of 12% in 2017 and of 19% in 2021. Average premium growth is expected to reach 35% per year from 2017 to 2021. Net income will be underpinned by strong underwriting and robust investment income. The combined ratio is forecast to reach 59% in 2017 and to 66% in 2021. As regulations require RNRC to be offered a share of business reinsured by Russian insurers, Fitch believes this business plan is achievable. Given the obligatory 10% cessions which direct insurers are obliged to offer to RNRC the company's insurance portfolio is subject to concentration risk. To mitigate this risk the company has implemented a number of internal procedures. The company monitors concentration risk per object and per territory and declines non-sanctioned risks in excess of these internal limits. Fitch views RNRC's investment strategy as prudent and conservative from a local capital markets perspective, with government fixed-income instruments accounting for 91% of total investments at end-2016. The company maintains good credit quality in its investment portfolio relative to its local peers, investing in government bonds and placing deposits with state-owned banks. RATING SENSITIVITIES RNRC's IFS Rating will likely be downgraded if Russia's Long-Term Local Currency Issuer Default Rating is downgraded. The rating could also be downgraded if RNRC's strategic role in the Russian reinsurance market or its ownership structure were to change. The rating could be upgraded if Russia is upgraded while RNRC's strategic role is being maintained. Contact: Primary Analyst Sam Mageed Director +44 203 530 1704 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Anastasia Surudina Analyst +7 495 956 5570 Committee Chairperson Federico Faccio Senior Director + +44 20 3530 1394 Media Relations: Julia Belskaya von Tell, Moscow, Tel: +7 495 956 9908, Email: julia.belskayavontell@fitchratings.com; Athos Larkou, London, Tel: +44 203 530 1549, Email: athos.larkou@fitchratings.com. Date of relevant committee: 31 May 2017 Additional information is available on www.fitchratings.com Applicable Criteria Insurance Rating Methodology (pub. 26 Apr 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below