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A.M. Best Revises Outlooks to Stable for INSURANCE COMPANY OF GAZ INDUSTRY SOGAZ
[August 31, 2017]

A.M. Best Revises Outlooks to Stable for INSURANCE COMPANY OF GAZ INDUSTRY SOGAZ


A.M. Best has revised the outlooks to stable from negative and affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of "bbb" of INSURANCE COMPANY OF GAZ INDUSTRY SOGAZ (SOGAZ) (Russia). SOGAZ is the ultimate operating parent of the SOGAZ group, which provides a range of insurance and non-insurance related services.

The revision of the outlooks to stable reflects the resilience of the group's operating performance and risk-adjusted capitalisation despite the challenging environment in its domestic market in recent years. Another contributing factor is the relative improvement in the macroeconomic fundamentals of Russia's economy in 2017, although the exposure to political risk remains high.

The SOGAZ group's resilient technical performance, supported by good underwriting risk selection and effective expense management, is demonstrated by a strong five-year weighted average combined ratio of 88.7% (2012-2016), and an excellent combined ratio of 83.2% in 2016. The group's overall operating performance remained strong in 2016, with a profit before tax of RUB 30.2 billion (approximately USD 513.4 million), which was impacted by a foreign exchange loss of RUB 4.5 billion (approximately USD76.5 million) due to the appreciation of the Russian rouble in 2016.

SOGAZ's consolidated risk-adjusted capitalisation remains solid, underpinned by excellent internal capital generation. In addition, SOGAZ's balance sheet strength is protected by a comprehensive reinsurance programme, largely provided by highly rated international insurers and a relatively conservative reserving approach, evidenced by routinely reported reserve releases. However, SOGAZ group's investment risk remains elevated, particularly due to thelow credit quality of its fixed income portfolio (by international standards) and material holdings in non-core assets, albeit reduced in recent years. The group's investment risk profile is likely to remain elevated, given the prevailing high financial system risk in Russia and the limited availability of high-quality investments.

SOGAZ benefits from a strong competitive position in the commercial lines segment, supported by its excellent brand and long-standing relationships with its large corporate clients. Additionally, the group's expansion has been partially supported by a number of acquisitions of smaller insurers over recent years. With consolidated gross written premiums (net of changes in gross premiums written under prior years' contracts) of RUB 157.5 billion in 2016 (approximately USD 2.7 billion), SOGAZ became the largest insurance group in Russia (ranked No. 2 in 2015).

This press release relates to Credit Ratings that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best's Credit Ratings. For information on the proper media use of Best's Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best's Credit Ratings and A.M. Best Rating Action Press Releases.


A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.


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