Standard & Poor’s has revised Allianz Russia’s outlook from negative to stable. They have affirmed a ‘BBB-‘ counterparty credit and financial strength, and ‘ruAA+’ Russia national scale ratings on the company.
The outlook revision reflects a gradual recovery in Allianz Russia’s risk-based capital adequacy to a level commensurate with its stand-alone credit profile.
The ratings on Allianz Russia reflects S&P’s view of its strategic importance to its parent, Germany-based Allianz SE (AA/Stable/A-1+), as well as Allianz Russia’s good investment-portfolio quality and sound operating results.
S&P’s view is that these strengths are partly offset by high industry risks associated with operating in the Russian Federation (foreign currency BBB/Stable/A-3; local currency BBB+/Stable/A-2; Russia national scale ‘ruAAA’), and Allianz Russia’s limited competitive position in Russia’s insurance market.
The long-term counterparty credit and insurer financial strength ratings on Allianz Russia incorporate a three-notch uplift from S&P’s assessment of its stand-alone credit profile. This reflects their view of Allianz Russia’s continuing importance for Allianz SE’s growth strategies in Russia, as well as continued support from the broader Allianz group.
Allianz Russia is only a part of Allianz SE’s presence in Russia and specializes in the industrial and commercial insurance of large domestic companies and Russian subsidiaries of international companies (global clients of Allianz).
In July 2011, Allianz SE announced a consolidation of its operations in Russia, namely, through the integration of Allianz Russia and two other entities Allianz controls in Russia, Progress Garant (not rated) and ROSNO (not rated). Allianz expects the united company to begin operations from the start of the second quarter of 2012.
The stable outlook reflects S&P’s view that:
– Allianz Russia will likely remain strategically important to Allianz.
– Allianz Russia’s regulatory capital will be assessed on the basis of its expected integration with other Allianz subsidiaries.
– After the integration, Allianz Russia policyholders will have at least the same level of protection as they do now.
– Prior to the expected integration, Allianz Russia’s risk-based capital adequacy will be maintained at least at the current level.
– Allianz Russia will show sound operating results in 2011 supported by positive underwriting and investment results.
Negative rating actions if:
– Allianz Russia’s policyholders would be disadvantaged under the new corporate structure.
– The regulator deems that Allianz Russia’s regulatory capital is inadequate, contrary to S&P’s current expectations.
– If a significant and sustained deterioration of Allianz Russia’s earnings, competitive position, capitalization, or investment portfolio quality as a separate legal entity.
S&P expects to withdraw the ratings on Allianz Russia when the integration is complete, because it is understood that the company will cease to exist as a separate legal entity.
S&P sees no indication of positive rating actions over the rating horizon.
Source : Standard & Poor’s
