A.M. Best Assigns Credit Ratings to Russian Reinsurance Company JSC
10 August 2018 - 2:29PM
Business Wire
A.M. Best has assigned a Financial Strength Rating of B
(Fair) and a Long-Term Issuer Credit Rating of “bb+” to Russian
Reinsurance Company JSC (Russian Re) (Russia). The outlook
assigned to these Credit Ratings (ratings) is stable.
The ratings reflect Russian Re’s balance sheet strength, which
A.M. Best categorises as strong, as well as its marginal operating
performance, limited business profile and appropriate enterprise
risk management.
The company’s balance sheet strength is underpinned by
risk-adjusted capitalisation at the strongest level, as measured by
Best’s Capital Adequacy Ratio (BCAR), and good quality retrocession
panel. Offsetting these positive rating factors is the relatively
low liquidity of Russian Re’s investment portfolio, with over a
third of invested assets held in real estate. Additionally, the
company reported adverse reserve development in the past, prior to
implementing a revised reserving approach from 2015, which
incorporates a more appropriate classification of risks.
Russian Re’s operating performance is marginal, with the company
reporting a five-year weighted average combined ratio of 106.2% and
return on equity of 5.1% (2013-2017). Technical losses were
reported in the four years prior to 2016, due to a combination of
factors, including poor underwriting experience in the Middle East
and North Africa region, economic challenges in the domestic market
and a relatively high expense ratio due to the company’s lack of
scale. Positive underwriting results were achieved in 2016, 2017
and the first half of 2018, with the combined ratio maintained
below 90%. The improvement was achieved through corrective measures
taken by the management, including exiting unprofitable territories
and tightening underwriting controls. Given the historical
volatility, uncertainty exists as to whether the improvements in
Russian Re’s performance will be sustained over a longer term. The
company’s investment results also have been subject to
fluctuations, particularly due to foreign exchange movements, but
have been positive in most years.
A.M. Best’s assessment of Russian Re’s business profile as
limited stems from its relatively small size, with gross written
premiums (GWP) of approximately USD 15 million in 2017, and limited
geographical diversification, with approximately 75% of GWP sourced
from Russia. The company maintains a 3% share in the local
reinsurance market, and has yet to demonstrate a successful
strategy of consistent and profitable international expansion. The
company’s medium-term plans include further growth in Asia Pacific
(where South Korea accounts for over half of Russian Re’s premium
volumes) and entering the Latin American market.
This press release relates to Credit Ratings that have been
published on A.M. Best’s website. For all rating information
relating to the release and pertinent disclosures, including
details of the office responsible for issuing each of the
individual ratings referenced in this release, please see A.M.
Best’s Recent Rating Activity web page. For
additional information regarding the use and limitations of Credit
Rating opinions, please view Understanding Best’s Credit
Ratings. For information on the proper media use of Best’s
Credit Ratings and A.M. Best press releases, please view
Guide for Media - Proper Use of Best’s Credit Ratings and A.M.
Best Rating Action Press Releases.
A.M. Best is a global rating agency and information provider
with a unique focus on the insurance industry. Visit
www.ambest.com for more information.
Copyright © 2018 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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A.M. BestValeria Ermakova, +44 20 7397
0269Senior Financial
Analystvaleria.ermakova@ambest.comorCatherine Thomas, +44 20
7397 0281Senior Director,
Analyticsmathilde.jakobsen@ambest.comorChristopher Sharkey,
+1 908 439 2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorJim Peavy, +1 908
439 2200, ext. 5644Director, Public
Relationsjames.peavy@ambest.com