Fitch Affirms ACE Russia's IFS at 'BBB+'; Outlook Stable

Wed May 15, 2013 11:58am EDT

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(The following statement was released by the rating agency) MOSCOW, May 15 (Fitch) Fitch Ratings has affirmed ACE Insurance Company CJSC (Russia)'s (ACE Russia) Insurer Financial Strength (IFS) rating at 'BBB+' and National IFS rating at 'AAA(rus)'. The Outlooks are Stable. ACE Russia's ratings were affirmed following the upgrade of its ultimate parent ACE Limited's Issuer Default Rating (IDR) by one notch to 'AA-' from 'A+', Outlook Stable, on May 14, 2013. KEY RATING DRIVERS The ratings continue to reflect Fitch's confidence about ACE Group's (ACE) willingness and ability to provide capital support to ACE Russia in case of need. However, Fitch has constrained the rating of ACE Russia to be no more than one notch higher than the local-currency sovereign rating of the Russian Federation ('BBB'/Stable), given the small size of the insurer relative to the ACE group and support from the parent being informal rather than provided though a formal support agreement. ACE Russia is part of ACE, a global insurer and reinsurer. The ultimate parent of the group is ACE Limited, domiciled in Switzerland. ACE Russia has received capital support from the group whenever required. The insurer also benefits from the group's advice and close monitoring in all key areas, including underwriting, reinsurance, claims, actuarial, investment and IT advice. In accordance with its rating criteria, Fitch views ACE Russia as standing at the "Important" level of strategic importance within ACE. This is based on the deep integration of the operations, shared brand name, sustainable track record of support and aligned corporate governance and risk management procedures, but limited scale of ACE Russia relative to ACE. On a standalone basis, ACE Russia would be assessed more than six notches below the parent. Its ratings consequently reflect, in accordance with agency's group rating methodology, a partial attribution approach of the strength of ACE. The rating of ACE Russia now stands five notches below the group assessment (benchmarked to the IFS ratings). RATING SENSITIVITIES If ACE Russia maintains sustainable and profitable growth of its insurance portfolio and achieves a more significant scale relative to ACE, Fitch could view it as a trigger for an upgrade. However, the agency does not expect the insurer to reach this target in the short or medium term. The rating could also be upgraded if a formal support agreement were to be introduced between ACE Limited and ACE Russia. Conversely, Fitch would view any weakening in the level of parent support to ACE Russia as a trigger for a downgrade. Any change in the level of the local-currency sovereign rating of the Russian Federation is also likely to lead to a change in ACE Russia's ratings. If the Russian Federation were to be upgraded, ACE Russia's IFS rating could be upgraded by one notch but not more than that, as the rating would then be constrained by the agency's group rating methodology. Any downgrade in the sovereign rating is likely to lead to an equivalent downgrade in ACE Russia's ratings. Contact: Primary Analyst Anastasia Litvinova Director +7 495 956 7082 Fitch Ratings CIS Limited Valovaya Street, 26 Moscow Secondary Analyst Dmitri Zalesskiy Associate Director +7 495 956 5570 Committee Chairperson Chris Waterman Managing Director +44 20 3530 1168 Media Relations: Anna Bykova, Moscow, Tel: +7 495 956 9901, Email: anna.bykova@fitchratings.com; Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com. Additional information is available on www.fitchratings.com. Applicable criteria, 'Insurance Rating Methodology', dated 11 January 2013, is available at www.fitchratings.com. Applicable Criteria and Related Research Insurance Rating Methodology — Amended here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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