The credit rating of JSC “Russian Reinsurance Company” (hereinafter, the Company) has been downgraded to A(RU) since the business profile assessment has deteriorated due to the still low operating efficiency demonstrated by the Company in 2023 and expected to remain so in the near term.
The credit rating is based on the Company’s adequate business profile, strong financial profile, and adequate management quality.
The Company is a specialized reinsurer of property, energy and engineering risks. The Company has been operating since 1992 and holds strong positions in the Russian reinsurance market.
KEY ASSESSMENT FACTORS
Adequate business profile. Historically, the property insurance segment in Russia and the ex-USSR is the core segment of the Company’s business. The imposition of sanctions in 2022 on the insurance market put pressure on the volume of inward reinsurance from abroad. Currently, almost entire business of the Company is focused on the inward premium on the Russian market. It is highly likely that this situation will continue this year.
ACRA assesses the diversification of the Company’s client base as medium. The quality of the Company’s product range is solid due to its high reinsurance underwriting expertise in relevant segments. The diversification of sales channels is medium.
The assessment of the Company’s operating efficiency has been lowered from comfortable to adequate, which resulted in the business profile assessment being downgraded. By the end-2023, the combined loss ratio (CLR) was above 1. The decline in the operating efficiency was mostly associated with the growing expense ratio. Although absolute expenses declined, the expense ratio grew due to a shrink in premium earned. In the Company’s opinion, CLR will improve in 2024, but it will remain higher than 1. ACRA notes that the Company is generally able to show a positive financial result from investment activities, which gives reason to view its operating efficiency as adequate.
The strong financial profile reflects the Company’s high capital adequacy, asset quality, and liquidity assessments.
The Company is increasing its capital using profits, which helps it to maintain a high capital adequacy assessment. The ratio of available capital to capital at risk, calculated as per ACRA’s methodology, is 2.6, which, in combination with other indicators, determines the high capital adequacy of the Company.
The asset quality assessment is sufficiently high, which reflects the Company’s high capital to asset ratio (0.21 at the end of 2023) and low asset risk index (1.5). The moderate concentration of assets limits the asset quality assessment and, in general, the Company’s financial profile.
The high assessments of current (1.6) and long-term liquidity (1.2) are based on the sufficient amount of highly liquid assets on the Company’s balance sheet.
The Company’s management quality is assessed as adequate in view of positive assessments of management experience and structure, actuarial function and risk management. Other factor components received neutral assessments.
KEY ASSUMPTIONS
- Maintaining the current risk management, investment and underwriting policies.
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 positive rating action may be prompted by:
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Considerably higher operating efficiency and a trend indicating it will remain high in the future;
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Decrease in asset concentration coupled with high assessments of capital adequacy and liquidity.
A negative rating action may be prompted by:
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Further decrease in operating efficiency;
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Deteriorating assessments of certain financial profile components (capital adequacy and/or asset quality).
rating components
Standalone creditworthiness assessment (SCA): а.
Adjustments: none.
Support: none.
ISSUE RATINGS
There are no outstanding issues.
REGULATORY DISCLOSURE
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 and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities.
The credit rating of JSC “Russian Reinsurance Company” was published by ACRA for the first time on June 9, 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 “Russian Reinsurance Company”, information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the IAS and IFRS financial statements of JSC “Russian Reinsurance Company”. The credit rating is solicited and JSC “Russian Reinsurance Company” participated in its assignment.
In assigning the credit rating, ACRA used only information, the quality and reliability of which were, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.
ACRA provided additional services to JSC “Russian Reinsurance Company”. No conflicts of interest were identified in the course of credit rating assignment.
