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AM Best Withdraws Credit Ratings of Rosgosstrakh Insurance Company, OJSC

·4-min read

AM Best has affirmed the Financial Strength Rating of B- (Fair) and the Long-Term Issuer Credit Rating of "bb-" of Rosgosstrakh Insurance Company, OJSC (RGS) (Russia). The outlook of these Credit Ratings (ratings) is stable. Concurrently, AM Best has withdrawn the ratings as the company has requested to no longer participate in AM Best’s interactive rating process.

The ratings reflect RGS’s balance sheet strength, which AM Best categorises as adequate, as well as its marginal operating performance, neutral business profile and marginal enterprise risk management (ERM).

AM Best expects RGS’s risk-adjusted capitalisation to be at the strongest level at year-end 2020, as measured by the Best’s Capital Adequacy Ratio (BCAR). However, AM Best expects the company’s prospective risk-adjusted capitalisation to deteriorate due to its ambitious premium growth plans and the payment of dividends in the medium term. The balance sheet strength assessment also reflects the insurer’s conservative investment portfolio, which improved significantly in terms of credit quality, diversification and exposure to affiliated holdings after RGS’s ownership was transferred to Bank Otkritie Financial Corporation PJSC. Nonetheless, RGS’s balance sheet is exposed to the high financial system risk in Russia and the limited availability of high-quality securities. The company’s financial flexibility is adequate, supported by its association with The Central Bank of the Russian Federation (CBR).

RGS has a track record of poor technical performance, driven by losses in the compulsory motor third-party liability (CMTPL) portfolio and demonstrated by a five-year (2015-2019) weighted average combined ratio of 118.2% (as calculated by AM Best). Underwriting performance improved between 2018 and 2020, helped by the remediation of the CMTPL portfolio and improved risk selection across the book initiated by the new management team. In addition, the performance of the motor portfolio in 2020 benefited from COVID-19-related travel restrictions, mainly in the second quarter. Whilst AM Best expects RGS’s overall operating results to be positive going forward, there is potential for the motor loss ratio to deteriorate given the segment’s intense competition, combined with the company’s plans to grow ahead of the market.

RGS is one of Russia’s leading insurers, with a strong market position in personal lines that benefits from an extensive distribution network and a well-recognised brand. In 2017, RGS received a capital injection of approximately USD 2 billion from the CBR, which became its controlling party. The company plans to grow strongly in the motor segment and to expand its life book of business. In AM Best’s opinion, the successful implementation of the company’s strategy is subject to execution risk.

AM Best considers RGS’s ERM as marginal, with new organisational structures and frameworks being developed in order to improve governance and risk culture.

This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2021 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210122005395/en/

Contacts

Todor Kitin
Financial Analyst
+44 20 7397 0335
todor.kitin@ambest.com

Valeria Ermakova
Associate Director, Analytics
+44 20 7397 0269
valeria.ermakova@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Communications
+1 908 439 2200, ext. 5644
james.peavy@ambest.com