LONDON--(BUSINESS WIRE)--A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of B (Fair) and issuer credit rating of “bb+” of OJSC Transsiberian Reinsurance Corporation (Transsib Re) (Russia). The outlook for both ratings remains stable.
The ratings of Transsib Re reflect its weak technical performance, as well as the high execution risk and limited expertise associated with Transsib Re’s international expansion. Offsetting these factors is Transsib Re’s strong level of risk-adjusted capitalisation.
The poor overall performance of Transsib Re’s foreign operations and motor portfolio in Russia, as well as its high expense base have contributed to its weak technical performance over the last five years. Transsib Re is taking steps to improve its technical profitability through the cancellation of loss-making treaties and the re-evaluation of its geographic presence.
Approximately one quarter of Transsib Re’s business is derived from outside Russia and the Commonwealth of Independent States. In the longer term, premium volumes sourced internationally are expected to contribute significantly to Transsib Re’s business. To date, Transsib Re’s international expansion has yet to demonstrate sustained growth and profitability. This factor, combined with the soft market conditions in Russia, is likely to continue to negatively affect Transsib Re’s performance.
Transsib Re’s risk-adjusted capitalisation remains at a strong level. Capital contributions from Transsib Re’s shareholders have predominantly supported growth of its surplus base since 2008. Due to the company’s weak earnings profile, uncertainty exists with the sustainability of Transsib Re’s capital management strategy in the medium to longer term.
There are currently no upward rating pressures until Transsib Re demonstrates an improvement in underwriting performance, while maintaining risk-adjusted capitalisation at a supportive level. Negative rating actions could occur if Transsib Re’s operating results were to continue to weaken. Additionally, a decline in its risk-adjusted capitalisation and/or deterioration in the economic fundamentals of Russia could negatively affect Transsib Re’s ratings.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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