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

LONDON--(BUSINESS WIRE)-- A.M. Best Europe – Rating Services Limited has upgraded the financial strength rating to B (Fair) from B- (Fair) and issuer credit rating to “bb” from “bb-” of OJSC Transsiberian Reinsurance Corporation (Transsib Re) (Russia). The outlook for both ratings has been revised to stable from positive.

The rating actions reflect Transsib Re’s improving risk-adjusted capitalisation, good business position and its good but declining underwriting performance. The main offsetting rating factors are its weak enterprise risk management and ongoing investment volatility.

Transsib Re benefited from a significant capital injection in late 2010 with additional money expected in early 2011. The company’s risk-adjusted capitalisation has improved as a result and will be further augmented by the retention of profits. A.M. Best believes that Transsib Re is taking steps to improve its limited capital flexibility, which has hindered it in the past. In order to comply with Russian regulatory requirements that will come into force in mid 2012, Transsib Re will continue to be dependent on retained earnings.

Transsib Re is one of the major reinsurance companies in Russia by premium income. Net written premiums (NWP) are expected to continue declining by 7% in 2010 and reach RUB 607 million by year end. This is a continuation of the trend started in 2009 when NWP fell by 14% and is part of a decision to reduce the company’s exposure in softening market conditions. A.M. Best expects gross written premiums to be in the area of RUB 800 – 820 million in 2010.

A.M. Best believes that based on 2010 results so far, underwriting performance is likely to be marginal, but investment performance is likely to stabilise due to the reduced equity exposure and tentative financial market improvements. During 2009, Transsib Re’s underwriting performance remained good, despite the challenging market conditions. The company’s claims ratio fell to 65.2% in 2009 as a result of its withdrawal from unprofitable contracts, and Transsib Re has seen an improvement in its investment income in 2009 whilst experiencing some ongoing unrealised losses.

The company still does not have a functioning capital model. It has commissioned a consulting firm to begin modelling its own risks, and A.M. Best believes that although this process is in its initial stages, it could improve enterprise risk management in the future if successfully implemented.

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilised include: “Risk Management and the Rating Process for Insurance Companies” and “Understanding BCAR for Property/Casualty Insurers”. Methodologies can be found at www.ambest.com/ratings/methodology.

In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.

A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best Company.Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

A.M. Best Co.
Laurence Plumb
Financial Analyst
+(44) 20-7626-6264
laurence.plumb@ambest.com
or
Rachelle Morrow
Senior Manager, Public Relations
+(1) 908-439-2200, ext. 5378
rachelle.morrow@ambest.com
or
Vasilis Katsipis
General Manager
+(44) 20-7626-6264
vasilis.katsipis@ambest.com
or
Jim Peavy
Assistant Vice President, Public Relations
+(1) 908-439-2200, ext. 5644
james.peavy@ambest.com