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

Mon Dec 2, 2013 12:26pm EST

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(The following statement was released by the rating agency) MOSCOW/LONDON, December 02 (Fitch) Fitch Ratings has affirmed ACE Insurance Company CJSC (Russia)'s (ACE Russia) Insurer Financial Strength (IFS) rating at 'BBB+' and its National IFS rating at 'AAA(rus)'. The Outlooks are Stable. KEY RATING DRIVERS The affirmation continues to reflect Fitch's confidence about ACE Group's (ACE) willingness and ability to provide capital support to ACE Russia in case of need. ACE Russia is part of ACE Group, a global insurer and reinsurer. The ultimate parent of the group is ACE Limited, domiciled in Switzerland (Long-Term IDR AA-/Stable). ACE Russia has received capital support from the group as and when 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. In accordance with its rating criteria, Fitch views ACE Russia as having an "Important" level of strategic importance within ACE. This is based on the deep integration of the operations, a shared brand name, sustainable track record of support and aligned corporate governance and risk management procedures, which are partly offset by the limited scale of ACE Russia relative to ACE. The fact that ACE Russia's portfolio contains a significant proportion of local risks of multinational companies that are also ACE Group's worldwide clients further supports Fitch's view of "Important" level of its strategic importance within ACE. On a standalone basis, ACE Russia would be assessed at 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. However, the rating of ACE Russia is currently constrained to no more than one notch above the local-currency sovereign rating of the Russian Federation (BBB/Stable). This is explained by the small size of the insurer relative to ACE Group and support from the parent being 'informal' rather than provided though a formal support agreement. As assessed by Fitch, ACE Russia's risk-adjusted capital is very strong and is more than supportive of the insurer's rating level. While capital level is somewhat excessive for ACE Russia's volume of net premiums and strong asset quality, when viewed from a local perspective, it is maintained at the entity level for regulatory compliance. Fitch expects that the group will continue to extend capital support to ACE Russia when required. Fitch views ACE Russia's reinsurance protection as adequate and of sound credit quality. The programme is predominantly based on quota-share and excess-of-loss treaties placed with the key operating companies within ACE Group, mainly ACE Tempest Reinsurance (IFS AA/Stable). The insurer also purchases facultative protection, a major part of which is placed with the same affiliated reinsurers and minor limits are ceded to a few local universal insurers and reinsurers. RATING SENSITIVITIES ACE Russia's ratings could be upgraded upon a formalisation of the support from ACE Limited to ACE Russia via a signed agreement. Conversely, Fitch would view any decline in the level of parent support to the insurer as a trigger for a downgrade. If ACE Russia maintains sustainable and profitable growth and achieves a more material scale relative to ACE Group, this could be viewed as a trigger for an upgrade. However, Fitch does not expect to see this over the medium term. 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 is upgraded, ACE Russia's IFS rating could be upgraded by no more than one notch as the rating would then be at the highest level allowed by the agency's group rating methodology, taking into account its level of strategic importance to the ACE Group. Any downgrade in the sovereign rating is likely to lead to a corresponding downgrade in ACE Russia's ratings. Contact: Primary Analyst Dmitri Zalesskiy Associate Director +7 495 956 5570 Fitch Ratings CIS Limited Valovaya Street, 26 Moscow 115054 Secondary Analyst Anastasia Litvinova Director +7 495 956 7082 Committee Chairperson Harish Gohil Managing Director +44 20 3530 1257 Media Relations: Julia Belskaya von Tell, Moscow, Tel: +7 495 956 9908, Email:; Hannah Huntly, London, Tel: +44 20 3530 1153, Email: Additional information is available at Applicable criteria, 'Insurance Rating Methodology', dated 13 November 2013, are available at 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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