Fitch Revises Outlook on ACE Russia to Negative; Affirms at 'BBB+'

Mon Mar 24, 2014 10:23am EDT

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(The following statement was released by the rating agency) MOSCOW/LONDON, March 24 (Fitch) Fitch Ratings has revised the Outlook on ACE Insurance Company CJSC (Russia)'s (ACE Russia) Insurer Financial Strength (IFS) rating to Negative from Stable and affirmed the rating at 'BBB+'. Fitch has also affirmed ACE Russia's National IFS rating at 'AAA(rus)' with Stable Outlook. KEY RATING DRIVERS The revision of the Outlook follows the revision of the Outlook on the Russian Federation's Long-term local currency Issuer Default Rating (IDR) to Negative from Stable on 21 March 2014. 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 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. In accordance with Fitch's group rating methodology, its ratings consequently reflect a partial attribution approach of the strength of ACE. However, ACE Russia's rating is currently constrained to no more than one notch above the Russian Federation's sovereign local currency IDR (BBB/Stable). This is due to 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. RATING SENSITIVITIES Any downgrade of Russia's sovereign local currency IDR is likely to lead to a corresponding downgrade in ACE Russia's international IFS. Conversely, a revision of the Outlook on Russia's sovereign local currency IDR to Stable would trigger the revision of ACE Russia's international IFS Outlook to Stable. ACE Russia's ratings could be upgraded upon a formalisation of 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 this over the medium term. Contact: Primary Analyst Anastasia Litvinova Director +7 495 956 7082 Fitch Ratings CIS Limited Valovaya Street, 26 Moscow 115054 Secondary Analyst Dmitri Zalesskiy Associate Director +7 495 956 5570 Committee Chairperson Chris Waterman Managing Director +44 20 3530 1168 Media Relations: Julia Belskaya von Tell, Moscow, Tel: +7 495 956 9908, Email: julia.belskayavontell@fitchratings.com; Hannah Huntly, London, Tel: +44 20 3530 1153, Email: hannah.huntly@fitchratings.com. Additional information is available on www.fitchratings.com. Applicable criteria, 'Insurance Rating Methodology', dated 13 November 2013, is available at www.fitchratings.com. Applicable Criteria and Related Research: Insurance Rating Methodology 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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