TEXT-S&P affirms Russia-based Ingosstrakh at 'BBB-'

Fri Nov 2, 2012 12:31pm EDT

Overview
     -- Ingosstrakh has acquired 50%, plus one voting share, of Bank
Soyuz 
from Russia's Deposit Insurance Agency and now owns 100% of Bank Soyuz. 
     -- The terms of the transaction are not materially different from those 
under our previous base-case scenario. 
     -- Consequently we are affirming our 'BBB-' and 'ruAA+' ratings on 
Ingosstrakh.
     -- The stable outlook reflects our belief that Ingosstrakh will at least 
maintain its competitive position, supported by its strong management, while 
preserving an adequate operating performance and marginal risk-based 
capitalization.  
 

Rating Action
On Nov. 2, 2012, Standard & Poor's Ratings Services affirmed its 'BBB-' 
long-term counterparty credit and financial strength ratings and 'ruAA+' 
Russia national scale ratings on Russia-based Ingosstrakh Insurance Co. The 
outlook is stable.


Rationale
The affirmation follows Ingosstrakh's acquisition of 50% plus one share of 
Bank Soyuz from the Russian Deposit Insurance Agency (DIA). The transaction 
cost Russian ruble (RUB) 2,815 billion (about $90 million). 

We currently regard Ingosstrakh's investment in Bank Soyuz as an investment in 
a subsidiary and therefore deduct this investment from our calculation of the 
company's total adjusted capital. This is because we no longer believe this 
capital to be available to support the insurance operations, and we will 
continue using this approach for our analyses. Despite the transaction, which 
increases capital charges, we expect that Ingosstrakh's risk-based capital 
adequacy will remain at least marginal, factoring in our anticipation of full 
profit retention for 2012.   

Additionally, we classify Bank Soyuz as a nonstrategic subsidiary of 
Ingosstrakh as our criteria define this term. This is because the degree of 
integration and business cooperation between the two entities has so far been 
limited. However, we believe that Ingosstrakh could still provide additional 
support to Bank Soyuz or negotiate such support. 

We note that Bank Soyuz:

     -- Represents about 30% of Ingosstrakh's capital, 
     -- Operates in geographic regions that are integral to the overall group 
strategy, 
     -- Has benefited from the group in the past, and 
     -- Is unlikely to be sold over the next 18 to 24 months.
 
The ratings on Ingosstrakh continue to reflect our view of the company's good 
competitive position in the Russian Federation (Russia; foreign currency 
BBB/Stable/A-2; local currency BBB+/Stable/A-2; Russia national scale 
'ruAAA'), its management team's positive track record, and Ingosstrakh's 
adequate operating performance and generally adequate capitalization, 
supported by appropriate reserving and reinsurance protection. 

These strengths are offset by still-high industry and country risks, the 
marginal quality of Ingosstrakh's investments, and its marginal financial 
flexibility.


Outlook
The stable outlook reflects our belief that Ingosstrakh will at least maintain 
its competitive position, supported by its strong management, while preserving 
an adequate operating performance and marginal risk-based capitalization. 

We would consider lowering the ratings if we believed Ingosstrakh's 
capitalization would fall below the level we regard as commensurate with the 
rating, for example, if the company made further significant investments in 
Bank Soyuz that are not covered by additional retained earnings.  

A negative rating action could also result if we observed a significant 
deterioration in the average quality of Ingosstrakh's investment portfolio or 
significant weakening of its underlying operating results.

We could take a positive rating action if Ingosstrakh significantly 
strengthened its competitive position and achieved at least strong risk-based 
capital adequacy, under our criteria, and a good-quality investment portfolio.


Related Criteria And Research
     -- Refined Methodology And Assumptions For Analyzing Insurer Capital 
Adequacy Using The Risk-Based Insurance Capital Model, June 7, 2010
     -- Group Methodology, April 22, 2009


Ratings List
Ratings Affirmed

Ingosstrakh Insurance Co.
 Counterparty Credit Rating             BBB-/Stable/--     
 Russia National Scale                  ruAA+/--/--        
 Financial Strength Rating              BBB-/Stable/--     



Complete ratings information is available to subscribers of RatingsDirect on 
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 
by this rating action can be found on Standard & Poor's public Web site at 
www.standardandpoors.com. Use the Ratings search box located in the left 
column.
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