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Related Issuers
Rating Action:

Moody's downgrades Allianz Russia to Baa2; stable outlook

Global Credit Research - 01 May 2013

London, 01 May 2013 -- Moody's downgraded the global-scale insurance financial strength rating (IFSR) of OJSC IC Allianz ("Allianz Russia") from Baa1 to Baa2. The Aaa.ru national scale IFSR was affirmed. All ratings have a stable outlook.

RATINGS RATIONALE

The rating action follows Allianz Russia's continuing pressures in underwriting profitability with combined ratios consistently above 100% over a number of years reflecting the highly competitive nature of the Russian insurance market, notwithstanding some gradual improvements in technical results following management actions.

At YE 2012, Allianz Russia's combined ratio continued to be relatively high at 103.2% (YE 2011: 101.7%) and gross premiums written decreased by 7% to EUR678m. We note improvements in underlying earnings in recent years following management actions (combined ratio down to 103% from 108% in 2010). Nevertheless, combined ratios continue to be higher compared to 2009 levels (98%) reflecting the difficult competitive environment.

Moody's believes the consolidation of Allianz's Russian non-life entities in 2012 can have positive impacts on the group's profitability and franchise. However, although the integration will increase Allianz Russia's consolidated premiums by around 20% by 2014, we believe that the group's underwriting profitability is likely to remain pressurized in the short to medium-term as competitive pressures are likely to remain difficult.

The ratings have a stable outlook. Allianz Russia's ratings continue to incorporate a significant level of support from Allianz SE (IFSR: Aa3, negative outlook). We expect Allianz SE to continue to support the company in distressed scenarios. Allianz Russia shares the "Allianz" brand since 2012 and also benefits from significant reinsurance protection as well as technical expertise from its parent.

Upward pressure could arise on Allianz Russia's rating if underwriting profitability substantially improves with combined ratio consistently below 100% without significant deterioration in the company's market position. Conversely, downwards pressure in the rating could develop if 1)- capitalisation deteriorates substantially with a regulatory solvency cover consistently below 115% or 2)-a substantial deterioration in the quality of the investment portfolio with significantly larger exposure to equities, property or non-investment grade bonds.

Based in Moscow, Allianz Russia is a non-life insurance company, subsidiary of Allianz SE. At YE 2012, gross premiums written were EUR678m.

The following rating has been downgraded with stable outlook:

Allianz Russia- global scale insurance financial strength rating to Baa2 from Baa1

The following rating has been affirmed:

Allianz Russia- national-scale insurance financial strength rating Aaa.ru

The principal methodology used in this rating was Moody's Global Rating Methodology for Property and Casualty Insurers published in May 2010. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Moody's Interfax Rating Agency's National Scale Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody's global scale ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ".nn" country modifier signifying the relevant country, as in ".ru" for Russia. For further information on Moody's approach to national scale ratings, please refer to Moody's Rating Methodology published in October 2012 entitled "Mapping Moody's National Scale Ratings to Global Scale Ratings".

ABOUT MOODY'S AND MOODY'S INTERFAX

Moody's Interfax Rating Agency (MIRA) specializes in credit risk analysis in Russia. MIRA is a joint-venture between Moody's Investors Service, a leading provider of credit ratings, research and analysis covering debt instruments and securities in the global capital markets, and the Interfax Information Services Group. Moody's Investors Service is a subsidiary of Moody's Corporation (NYSE: MCO).

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Laura Perez Martinez
Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Simon Harris
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's downgrades Allianz Russia to Baa2; stable outlook
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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