August 01, 2014 |
|MOSCOW (Standard & Poor's) July 31, 2014--Standard & Poor's Ratings Services today affirmed its 'BBB-' long-term financial strength and counterparty credit ratings on Russia-based VTB Insurance Ltd. The outlook remains negative. |
At the same time, Standard & Poor's affirmed 'ruAAA' long-term Russia national scale rating on VTB Insurance.
The ratings on VTB Insurance is determined by the company's core status within the VTB Group, which remains unchanged. The core status reflects the close integration with the VTB Group, in terms of operations and strategy, the company's growing contribution to the group's profitability, and the group's commitment to support VTB Insurance. In 2013, VTB Insurance contributed close to 10% of the group's net income, and Standard & Poor's believes this contribution will grow in 2014. Standard & Poor's believes that, in light of VTB Insurance's growing profitability, its importance to the VTB Group has increased and it is therefore unlikely to be sold. According to Standard & Poor's methodology, Standard & Poor's equalize the ratings on VTB Insurance with Standard & Poor's 'bbb-' group credit profile (GCP) on the VTB Group, which incorporates uplift for potential extraordinary Russian government support.
Standard & Poor's has raised stand-alone credit profile (SACP) on VTB Insurance to 'bb+' from 'bb', to reflect Standard & Poor's view of VTB Insurance's improved capital position. According to Standard & Poor's capital model, VTB Insurance's capital position improved in 2013, based on improved earnings and an increase in capital. Under Standard & Poor's base case, Standard & Poor's assumes net income of Russian ruble (RUB)9 billion-RUB12 billion ($255 million-$340 million) in 2014-2016. However, Standard & Poor's continues to apply a conservative approach toward VTB Insurance's capital management, which follows VTB Group's centralized capital management policy, aiming to maximize dividend payouts from its subsidiaries, and support the subsidiaries in case of need. Standard & Poor's believes that VTB Insurance will distribute maximum possible dividends, while retaining at least a 150% regulatory solvency ratio. Nevertheless, largely based on the improvement in 2013, Standard & Poor's has revised Standard & Poor's capital and earnings assessment to lower adequate from less than adequate.
The revision of Standard & Poor's capital and earnings assessment has led to an improved financial risk profile of less than adequate. Combined with a fair business risk profile, this results in an anchor of 'bb+' rather than 'bb' previously.
The negative outlook on VTB Insurance reflects the negative outlook on VTB Bank, which in turn reflects the negative outlook on Russia (foreign currency: BBB-/Negative/A-3; local currency: BBB/Negative/A-2).
Standard & Poor's view is that VTB Insurance will preserve its core status within the group. Therefore, any rating action on VTB Bank would be followed by similar action on VTB Insurance.
Standard & Poor's could lower the rating on VTB Insurance if Standard & Poor's lowered the ratings on VTB Bank. Standard & Poor's would also consider lowering the rating if Standard & Poor's no longer considered VTB Insurance to have the characteristics of a core group subsidiary.
Standard & Poor's could lower the SACP in case of a significant slowdown in VTB Insurance's growth rates and deterioration in its profitability, which might weaken both its competitive position and financial risk profile.
Standard & Poor's could revise the outlook on VTB Insurance to stable in case of a similar rating action on VTB Bank. Standard & Poor's believes that this is dependent upon a revision of the outlook on Russia to stable.
Standard & Poor's could further raise Standard & Poor's SACP on the company if it distributed lower dividends than expected, which might strengthen its financial risk profile.
Company: VTB Insurance
|Full company name||Limited liability company «VTB Insurance»|
|Country of risk||Russia|
|Country of registration||Russia|