A.M. Best Affirms Ratings of OJSC Transsiberian Reinsurance Corporation

OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has affirmed the financial strength rating of B- (Fair) and the issuer credit rating of “bb-” of OJSC Transsiberian Reinsurance Corporation (Transsib Re) (Russia). The outlook for both ratings is positive.

The ratings reflect Transsib Re’s good business position, weak but improving risk-adjusted capitalisation and good underwriting performance. The main offsetting factors are its limited financial flexibility and volatility in the investment income results and weak enterprise risk management.

Transsib Re’s gross written premiums have been declining over the previous two years due to the softening market conditions, which have led the company to re-evaluate its exposure to certain large risks and the Russian motor quota share business. However, A.M. Best expects the decline to be halted mainly due to the increase in liability business both in Russia and Kazakhstan and further growth emanating from the Turkish market.

Underwriting performance has remained good despite the challenging market conditions. The combined ratio is likely to stabilise at around 95%, as the claims ratio improves due to the lack of significant losses and the reduction in motor business. Investment performance has been badly impacted by the decline in equity markets and the general economic volatility, although A.M. Best recognises that a significant part of the decline was due to unrealised capital losses. A.M. Best believes that investment performance is likely to stabilise in 2010 due to the reduced equity exposure (mainly due to the revaluation of the held assets).

Transsib Re benefited from a significant capital injection in 2008, which was partly offset by the significant losses in the same year. Risk-adjusted capitalisation is likely to start improving as the company follows a no-dividend policy and retention levels are significantly reduced. A.M. Best believes that Transsib Re has limited capital flexibility as it depends on future retained earnings, although there are no dividend payments planned in the nearest future.

A.M. Best believes that the company needs to strengthen its enterprise risk management by defining its risk appetite and aligning key processes such as investment strategy and evaluation of catastrophe exposures with it.

For Best’s Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.