The international scale credit rating of VSK Insurance House (hereinafter, VSK or the Company) is based on the Company’s moderate business profile, high-quality assets, the high level of current liquidity, and satisfactory capital adequacy.
VSK is the head company of a large Russian insurance group. It ranked fifth in terms of insurance premiums in 2023 among companies of the non-life segment. The group also includes a life insurance company and a small company operating in a motor insurance segment. The main volume of business (about 95% of insurance premiums for 2023) is focused on the group’s head company. VSK operates a broad regional network.
The Agency conducted the rating analysis based on the consolidated financial statements dated June 30, 2024 that include subsidiaries. On October 1, 2024, the life insurance portfolio was transferred from a subsidiary to a company outside the group’s perimeter, and to reflect this event, ACRA applied additional adjustments to the financial statements.
KEY ASSESSMENT FACTORS
Moderate business profile. The business profile assessment stems from the operating environment assessment, taking into account the Company’s positions in the insurance market.
VSK operates in the jurisdiction of the Russian Federation, and the degree of development of the national insurance market puts pressure on the base assessment of the operating environment. ACRA assesses it as weak, since the share of the total amount of accrued premiums in all types of insurance in Russia’s GDP did not exceed 1.5% over the past five years.
In 2023 and H1 2024, VSK’s market share was about 5%. The Company’s strongest positions are in the motor hull insurance and compulsory motor third party liability insurance (CMTPLI) segments, in each of which it has a market share of more than 10% and ranks fourth by the size of insurance premium. In addition, the Company also holds fourth place in the voluntary medical insurance, accident insurance, corporate property insurance, and personal property insurance segments. ACRA notes the absence of factors posing risks to the sustainability of the Company’s business model. VSK’s operating efficiency is stably at the market average level.
The Company’s asset quality is assessed as high because VSK invests primarily in low-risk assets while the share of high-risk assets does not exceed 50% of equity. According to ACRA’s criteria, the concentration of assets is still acceptable and it does not affect the asset quality assessment. The highest concentration is typical for funds held in banks with high ratings and invested in government securities, as well as for the share of reinsurers in reserves. Reinsured risks are transferred to companies with high credit ratings.
Capital adequacy. The satisfactory capital adequacy assessment reflects the value of the regulatory ratio and an adjustment for the access to sources of capital. The regulatory ratio amounted to 120% on June 30, 2024 and decreased in July and August due to the introduction of higher risk add-ons used to calculate this indicator. Taking into account the Company’s dividend policy, ACRA is of the opinion that the current capital adequacy assessment will remain in the medium term.
The liquidity factor is assessed at a high level based on the current liquidity ratio (over 135% as of June 30, 2024), and the results of the liquidity stress test conducted by the Agency do not affect this assessment.
Taking into account the assessments of the above factors, the Company’s standalone creditworthiness assessment (SCA) is determined at ‘bbb‘.
KEY ASSUMPTIONS
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The Company maintaining its positions in the Russian insurance market.
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The Company maintaining its capital adequacy and asset management 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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Much wider penetration of insurance services in the Company’s jurisdiction of presence;
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Higher capital adequacy level.
A negative rating action may be prompted by:
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Significant decrease in the Company’s share in the insurance market;
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Deteriorating asset profile;
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Lower current liquidity.
RATING COMPONENTS
SCA: bbb.
Adjustments: none.
Support: none.
ISSUE RATINGS
There are no outstanding issues.
REGULATORY DISCLOSURE
The credit rating has been assigned to VSK under the international scale based on the Methodology for Assigning Credit Ratings to Insurance Companies under the International Scale and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities.
An international scale credit rating has been assigned to VSK for the first time. 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 VSK, information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the GAAP and IFRS financial statements of VSK. The credit rating is solicited and VSK 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 VSK. No conflicts of interest were discovered in the course of credit rating assignment.
