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Fitch Affirms Belgosstrakh at 'B-'; Outlook Positive
October 17, 2017 / 12:53 PM / a month ago

Fitch Affirms Belgosstrakh at 'B-'; Outlook Positive

(The following statement was released by the rating agency) MOSCOW, October 17 (Fitch) Fitch Ratings has affirmed Belarusian Republican Unitary Insurance Company's (Belgosstrakh) Insurer Financial Strength (IFS) Rating at 'B-'. The Outlook is Positive. KEY RATING DRIVERS The rating mirrors Belarus's 'B-' Long-Term Local Currency Issuer Default Rating (Positive Outlook) and reflects the insurer's 100% state ownership. The rating also reflects the presence of guarantees for insurance liabilities under compulsory lines, the leading market position of Belgosstrakh in a number of segments, its adequate capital position, sustainable profit generation and the fairly weak quality of its investment portfolio. The Belarusian state established a strong level of support for Belgosstrakh in its legal framework, with the aim to develop a well-functioning system of insurance for workers, agricultural business and individual property. Belgosstrakh maintains its strong market positions on the Belarusian insurance market and remains the exclusive provider of a number of compulsory lines, including state-guaranteed employers' liability, homeowners' property, agricultural insurance and other minor lines. From a regulatory capital perspective, Belgosstrakh's solvency margin cover, calculated using the Solvency-I like formula on statutory accounts, stood at 11x at end-2016 (end-2015: 13x). However, Belgosstrakh's capital score was below 'Somewhat Weak' in Fitch's Prism Factor-Based (FBM) Model based on 2016 IFRS results, in line with 2015's. Compared with the regulatory calculation, available capital is lower in Prism following higher charges on invested assets, mainly concentrated in Belarus and directly linked with the sovereign credit profile. Belgosstrakh has a track record of profitable performance over the last five years. Net profit slightly decreased to BYN93 million in 2016 from BYN106 million in 2015, based on IFRS reporting. The net income-to-equity ratio was 29% in 2016 (2015: 28%). In 2016 the company reported a historically strong investment result and an improved underwriting result. In 6M17 Belgosstrakh reported net income of BYN16 million based on local GAAP accounting standards. The net result was supported by a positive underwriting result and, to a lesser extent, by investment income. Based on IFRS reporting Belgosstrakh's combined ratio improved to 93% in 2016 from 105% in 2015, as the loss ratio shrank to 55% from 67%. The latter was due to stronger performance of the compulsory workers' compensation line, and of property insurance, which accounted for 32% and 24%, respectively of non-life net written premiums in 2016. The compulsory MTPL line, whose share of non-life net written premiums remained at 22% in 2016, continued to show a positive underwriting result with a loss ratio of 69%. Fitch views the quality of Belgosstrakh's investment portfolio as fairly weak. This reflects the predominance of instruments mainly invested in state bonds and in deposits of state-owned banks, which are constrained by the sovereign's 'B-' rating, and the presence of significant concentrations by issuer. Belgosstrakh's ability to achieve greater diversification is limited by the narrow local investment market and strict regulation of the insurer's investment policy RATING SENSITIVITIES A change in Belarus's Local-Currency Long-Term IDR is likely to lead to a corresponding change in the insurer's IFS Rating. Significant changes to the insurer's relationship with the government would also likely have a direct impact on Belgosstrakh's ratings. Contact: Primary Analyst Anastasia Surudina Analyst +7 495 956 5570 Fitch Ratings CIS Limited Valovaya Street, 26 Moscow 115054 Secondary Analyst Stephan Kalb Senior Director +49 69 768076 118 Committee Chairperson Federico Faccio Senior Director +44 20 3530 1394 Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email: athos.larkou@fitchratings.com. 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. 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