The credit rating of SCOR Perestrakhovaniye (SCOR P.O.) (hereinafter, the Company) is based on the very high likelihood of extraordinary support from the parent company, which has high creditworthiness. The Company continues to maintain a moderately high standalone creditworthiness assessment (SCA) due to its strong business and financial profiles and adequate quality of corporate governance.
SCOR P.O. is a universal reinsurance company and a wholly owned subsidiary of SCOR S.E., one of the world’s largest reinsurers (hereinafter, the Group, the Supporting Organization, or the SO). The Company provides reinsurance coverage to insurers in Russia, Armenia, Moldova, other CIS countries, and also in Georgia and Mongolia.
Key rating assessment factors
Very high likelihood of extraordinary support from the shareholder. In ACRA’s opinion, if necessary the Supporting Organization will provide the Company with short-term and long-term funding and capital injections. ACRA assesses the final country risk of the Supporting Organization’s jurisdiction (France) against the country risk of Russia and the Supporting Organization’s creditworthiness as strong.
The degree of integration between the Company and the SO is assessed as very strong in view of the following:
- Significant operational integration between the Company and the Group (the Company’s management standards and risk management system are established in accordance with the intragroup approaches of the Supporting Organization);
- The Group provides reinsurance coverage for all types of insurance risks in the Company’s portfolio;
- The Company is a financially stable entity operating in the Russian and CIS markets in accordance with the Group’s strategy and possesses substantial growth potential.
Taking into account the small size of the Company compared to the Supporting Organization and potential significant reputational risks the Group would face should the Company go bankrupt, the credit rating of the Company is assigned on par with the Russian Federation.
Strong business profile. The Company maintains a stable market position, demonstrating fairly strong operating indicators. The Company ranks 7th in terms of incoming reinsurance premiums in the Russian market.
According to ACRA’s criteria, the diversification of the Company’s client base continues to be below average. Furthermore, in 2019 the share of the five largest clients in the reinsurance portfolio increased compared to the previous year to 58% (vs. 43% in 2018). The diversification of sales channels remains above average. The Company services a large number of brokers, which provide for the bulk of premiums. Direct sales account for around 17% of the Company’s total revenue. ACRA assesses the quality of the Company’s product line as high because the Company can use the underwriting competencies of the Supporting Organization and offer its clients protection against a wide range of insurance risks.
In 2019, the premium received by the Company under reinsurance contracts amounted to 74% compared to the previous year, which is due to the reallocation of a number of segments between the Group’s companies. In particular, the Company stopped carrying out reinsurance in Ukraine and concluding reinsurance contracts on personal insurance. The main segment of the Company’s business is property insurance and CAR/EAR insurance. ACRA believes that in 2020-2022, the Company’s growth rate will match average market indicators. Despite the fact that the operational efficiency of the Company is historically quite volatile, ACRA believes that the expected value of the combined loss ratio will be within a comfortable range in the medium term.
The Company’s strong financial profile is based on high capital adequacy, high asset quality, and strong liquidity. These indicators have remained the same compared to the previous year, which confirms the effectiveness and stability of the Company’s capital and asset management.
According to ACRA’s methodology, the ratio of available capital to capital at risk is 3.8, which in combination with the estimates of other indicators determines the Company’s high capital adequacy.
The high assessment of asset quality is based the fact that the Company invests mainly in assets with low risk levels as well as maintains a high capital to asset ratio (at the end of 2019, this ratio was 0.3). The final assessment of asset quality has been adjusted to reflect the high concentration of assets.
The Company’s strong liquidity is based on its short and long-term liquidity ratios, both of which stood at 1.5 at the end of 2019.
Corporate governance quality is assessed as adequate due to the positive assessment of management’s experience and structure, as well as corporate governance standards. Other components of the factor are assessed as neutral.
- The Company's status within the Group remaining unchanged.
Potential outlook or rating change factors
The Stable outlook assumes that the rating will most likely stay unchanged within the 12 to 18-month horizon.
A negative rating action may be prompted by:
- Reduced likelihood of extraordinary support from the Group.
Support: on par with RF.
No outstanding issues have been rated.
The credit rating has been assigned under the national scale for the Russian Federation based on the Methodology for Credit Ratings Assignment to Insurance Companies Under the National Scale for the Russian Federation, the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities, and the Methodology for Analyzing Relationships Between Rated Entities and Supporting Organizations Registered Outside the Russian Federation.
The credit rating of SCOR P.O. was published by ACRA for the first time on June 1, 2018. The credit rating and its outlook are expected to be revised within one year following the publication date of this press release.
The credit rating has been assigned based on the data provided by SCOR P.O., information from publicly available sources, as well as ACRA’s own databases. The rating analysis was performed using the SSAS financial statements of SCOR P.O. and the IFRS financial statements of SCOR P.O. The credit rating is solicited, and SCOR P.O. participated in its assignment.
No material discrepancies between the provided information and the data officially disclosed by SCOR P.O. in its financial statements have been discovered.
ACRA provided no additional services to SCOR P.O. No conflicts of interest were discovered in the course of credit rating assignment.