The credit rating of JSC RNRC (hereinafter, the Company, or RNRC) is based on the Company’s very strong business profile and financial profile along with its high-quality management, as well as the very high probability of extraordinary support being provided by the state.
RNRC is a specialized reinsurance company established in accordance with Article 13.1 of Federal Law No. 4015-I “On Insurance Business in the Russian Federation” dated November 27, 1992. The Company was established to provide additional protection to proprietary interests amid international sanctions. In accordance with the law, the Company may act as a party to the majority of outgoing reinsurance contracts concluded by Russian insurance companies (mandatory cession).
key assessment factors
The Company’s very strong business profile stems from its stable position in the insurance market and very strong operating performance expected in the short and medium terms. According to ACRA’s criteria, the Company’s client base diversification is average. The diversification assessment takes into account the limited client base, which is to some extent offset by the obligation of insurance companies to transfer part of the reinsurance premium to RNRC. ACRA assesses the quality of the Company’s product range as high, as RNRC possesses underwriting expertise across almost all significant types of insurance and reinsurance. Sales channels for insurance products are not diversified, with the majority of premiums coming in the form of mandatory cession and sanctions business. Nevertheless, this sales channel is practically devoid of risks, so ACRA assesses the Company’s service distribution system as extremely reliable.
The operating efficiency of the Company is assessed as high, with the combined loss ratio expected to be significantly lower than 1 in the medium term. On the backdrop of the introduction of restrictions in Russia’s insurance market with regard to transferring insurance risks to companies from a number of foreign countries, as well as the increase in the share of mandatory cessions transferred to RNRC, the projected growth of the Company’s premiums is expected to exceed the market average in 2022.
The Company’s very strong financial profile is based on high capital adequacy, high asset quality, and strong liquidity.
The ratio of available capital and capital at risk calculated according to ACRA’s methodology, stands at 3.4, which, combined with the assessments of other indicators, defines RNRC’s capital adequacy as high. ACRA has improved its assessment of the Company’s capital adequacy taking into account the increase of the Company’s authorized capital and the reduction of the impact of the risk of the maximum possible loss in the stress scenario.
The high assessment of the quality of the Company’s assets is due to the Company investing mainly in low-risk assets — most of its assets are invested in debt securities of the Russian Federation, as well as financial and non-financial companies with a high level of reliability. The Company also maintains its capital-to-assets ratio at a high level, which amounted to 0.65 as of the end of 2021.
The Company’s strong liquidity is based on assessments of short and long-term liquidity ratios of 3.36 and 2.88, respectively (actual indicators as of the end of 2021).
The Company’s management quality is assessed as high based on positive assessments of all the components of the factor.
Very high likelihood of extraordinary support from the state. In ACRA’s opinion, if necessary the Company will be provided with sufficient short-term and long-term funding, including capital injections, in view of the following:
The Company performs the function of a national reinsurer, which has considerable significance for the Russian economy;
The state has significant influence on the Company’s strategy and operations.
The degree of dependence of the Company and the state on homogenous risk factors is assessed as medium.
Taking into account the above factors, the Company’s credit rating is set at AAA(RU).
Retaining the key legislative provisions defining the Company’s status within the three-year horizon;
The state promptly providing extraordinary support to the Company if necessary;
Maintaining the current policies that govern risk management, investment, and underwriting (i.e. retaining the Company’s business model) within the three-year horizon.
POTENTIAL OUTLOOK OR RATING CHANGE FACTORS
The Stable outlook assumes that the rating will highly likely stay unchanged within the 12 to 18-month horizon.
A negative rating action may be prompted by:
- Downgrade of the Company’s financial profile assessment coupled with a lower level of state participation in the Company’s activities.
Standalone creditworthiness assessment (SCA): ааа.
Support: from the state, however, as the Company’s SCA has received the highest possible assessment, this support does not influence RNRC’s credit rating, which is set at AAA(RU).
There are no outstanding issues.
The credit rating has been assigned under the national scale for the Russian Federation based on the Methodology for Assigning Credit Ratings to Insurance Organizations on the National Scale for the Russian Federation, Methodology for Analyzing Rated Entities Associated with a State or a Group, and the Key Concepts Used by the Analytical Credit Rating Agency Within the Scope of Its Rating Activities.
The credit rating of JSC RNRC was published by ACRA for the first time on May 2, 2017. 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 was assigned based on data provided by JSC RNRC, information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the GAAP and IFRS financial statements of JSC RNRC. The credit rating is solicited, and JSC RNRC participated in its assignment.
In assigning the credit rating, ACRA used only information, the quality and reliability of which was, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.
ACRA provided additional services to JSC RNRC. No conflicts of interest were discovered in the course of credit rating assignment.