ACRA affirms ААА(RU) to JSC RNRC, outlook Stable

The credit rating of JSC RNRC (hereinafter, the Company, or RNRC) is driven by the maintenance of the key assessments, i. e. the Company’s very strong business profile and strong financial profile along with its high-quality management. The support factor from the Bank of Russia remains sufficiently strong; however, it has an insignificant impact (plus one notch) on the Company’s resulting credit rating, as the Company has a high standalone creditworthiness assessment (SCA).

RNRC is a specialized reinsurance company established in accordance with Article 13.1 of the Federal Law “On Insurance Business in the Russian Federation” dated November 27, 1992. With its sole shareholder being the Bank of Russia, the Company was established to provide additional protection to proprietary interests under international sanctions. In accordance with the law, the Company may act as a party in the majority of outgoing reinsurance contracts concluded by Russian insurance companies (mandatory cession).

Key rating assessment factors

The Company’s very strong business profile stems from its stable position in the insurance market and very strong operating performance expected in the short and medium terms. According to ACRA’s criteria, the Company’s customer base diversification is average. The diversification assessment takes into account the limited client base, which is to some extent offset by the obligation of insurance companies to transfer part of the reinsurance premium to RNRC. ACRA assesses the quality of the Company’s product range as high, as RNRC possesses underwriting expertise across almost all significant types of insurance and reinsurance. Sales channels for insurance products are not diversified, with the majority of premiums coming in the form of mandatory cession and the sanctions business. Nevertheless, this sales channel is practically devoid of risks, so ACRA assesses the Company’s service distribution system as extremely reliable.

The operating efficiency of the Company is assessed as high, with the combined loss ratio expected to be significantly lower than 1 in the medium term, and growth rates anticipated to align with the market average in 2021–2022.

The Company’s strong financial profile is based on high capital adequacy, high asset quality, and strong liquidity.

The ratio of available capital and capital at risk, calculated according to ACRA’s methodology, stands at 1.6, which, combined with the assessments of other indicators, defines RNRC’s capital adequacy as high.

The high assessment of the Company’s assets is supported by the Company investing mainly in low-risk assets (mainly in debt securities of the Russian Federation, as well as of financial and non-financial companies with a high level of reliability). The Company also maintains its capital-to-assets ratio at an exceptionally high level (0.6 as of the end of 2020).

The Company’s strong liquidity is based on assessments of short and long-term liquidity ratios of 3.1 and 2.7 respectively (as of the end of 2020).

The Company’s management quality is assessed as high based on positive assessments of all factor components.

High likelihood of extraordinary support from the Bank of Russia. The very high degree of state influence on RNRC is manifested in the government’s shareholder and operational control over the Company, participation of the Company in government projects, and the Bank of Russia’s commitment to provide capital injections to the Company in the event of significant losses arising from sanctions risks. The Company’s systemic importance to date is assessed as medium. Taken together, these factors may potentially entail a three-notch increase of the Company’s SCA in accordance with ACRA’s methodology.

Key assumptions

  • Retaining the key legislative provisions defining the Company’s status within the three-year horizon;
  • Bank of Russia remaining the controlling shareholder within the three-year horizon;
  • Sustaining the current policies that govern risk management, investments, and underwriting (i.e. retaining the Company’s business model) within the three-year horizon.

Potential outlook or rating change factors

The Stable outlook assumes that the rating will most likely stay unchanged within the 12 to 18-month horizon.

A negative rating action may be prompted by:

  • Downgrade in the Company’s financial profile assessment coupled with a decline in the likelihood of extraordinary support from the Bank of Russia.

Rating components

SCA: аа+.

Adjustments: none.

Support: SCA +3 notches.

Issue ratings

There are no outstanding issues.

Regulatory disclosure

The credit rating has been assigned to JSC RNRC under the national scale for the Russian Federation based on the Methodology for Assigning Credit Ratings to Insurance Organizations on the National Scale for the Russian Federation, the Key Concepts Used by the Analytical Credit Rating Agency Within the Scope of Its Rating Activities, and the Methodology for Analyzing Relationships Between Rated Entities and the State.

The credit rating of JSC RNRC was published by ACRA for the first time on May 2, 2017. The credit rating and its outlook are expected to be revised within one year following the publication date of this press release.

The credit rating was assigned based on data provided by JSC RNRC, information from publicly available sources, as well as ACRA’s own databases.

The rating analysis was performed using the RAS and IFRS statements of JSC RNRC. The credit rating is solicited, and JSC RNRC participated in its assignment.

In assigning the credit rating, ACRA used only information, the quality and reliability of which was, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.

ACRA provided additional services to JSC RNRC. No conflicts of interest were discovered in the course of credit rating assignment.

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