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On April 16, 2010, Standard & Poor's raised its long-term counterparty credit and financial strength ratings on Moscow Reinsurance Co. (Moscow Re) to 'BB' from 'BB-'. The outlook is stable.
The rating actions are based on the view of analysts that Moscow Re's competitive position has improved as a result of continuing integration into the Russia-based IG MSK (Insurance Group MSK).
Moscow Re's competitive advantages include its solid position in
property and motor risks, significant technical expertise, and strong
brand name, supported by integration into IG MSK, one of the largest
insurance groups in Russia.
Despite challenging market conditions and a contracting reinsurance
market, Moscow Re managed to increase its reinsurance portfolio
significantly.
In the report from S&P it says:
"Prospectively we view Moscow Re's investments as adequate, reflecting
limited diversification and adequate credit quality. The portfolio
currently includes RUB320 million of promissory notes issued by MSK
(21% of investments), but we understand from management that this
investment is temporary and will be eliminated, restoring the
conventional structure of Moscow Re's investment portfolio within the
next one month.
About 13% of Moscow Re's investments were deposits with the Bank of
Moscow (not rated) as of year-end 2009, bringing the total
related-party exposure in the investment portfolio to 34%, which we
consider high. The portfolio remains generally concentrated: The top
four counterparties account for more than 80% of all investments.
Exposure to market risk is limited, in our view, because only 4% of the
portfolio consists of equities and 6% comprises government, municipal,
and corporate bonds.
We regard Moscow Re's capitalization as adequate and capital adequacy
good. However, the absolute size of the capital base is small. We
consider reserves and reinsurance protection to be adequate".
The stable outlook reflects the view of analysts that Moscow
Re will continue to benefit from its membership of IG MSK and the
commitment of its shareholders in its quest to become one of the
leading reinsurers in Russia.
