Fitch Affirms Belgosstrakh at 'B-'; Outlook Stable

November 25, 2016 - Cbonds


Fitch Ratings has affirmed Belarusian Republican Unitary Insurance Company's (Belgosstrakh) Insurer Financial Strength (IFS) rating at 'B-'. The Outlook is Stable.

The rating and Outlook mirror Belarus's 'B-'/Stable Local Currency Long-Term Issuer Default Rating (IDR) and reflect the insurer's 100% state ownership. The rating also reflects the presence of guarantees for insurance liabilities under compulsory lines, the insurer's leading market position in a number of segments in Belarus, its sustainable profitability, adequate capital position, and the low quality of its investment portfolio.

Belgosstrakh has a market-leading positon in Belarus as the exclusive provider of a number of compulsory lines, including state-guaranteed employers' liability, homeowners' property, agricultural insurance and a number of other more minor lines. The Belarusian state has established strong support for Belgosstrakh in its legal framework, including direct guarantees on policyholder obligations under compulsory lines and through significant capital injections in previous years.

Belgosstrakh's operating performance has been profitable for the last five years with net profit reaching BYN54m in 2015 (2014: BYN19m). The improvement in 2015 was mainly achieved through one-off FX gains on investments of BYN35m, which occurred due to a devaluation of the Belarus rouble. The investment result offset a moderate underwriting loss for the regular portfolio (excluding two government-guaranteed lines with a specific reserving methodology). In 9M16 the insurer reported net income of BYN24m (9M15: BYN53m), which is underpinned by robust investment income and an improved, albeit still negative underwriting result for regular portfolio.

Belgosstrakh's regular non-life portfolio has made moderate underwriting losses in recent years. Its loss ratio remained relatively stable at 56.5% in 2015 (2014: 59.0%), a significant improvement from the five-year average between 2011 and 2015 of 63.3%. Belgosstrakh reported a modest negative underwriting result for the regular portfolio in 9M16, with a loss ratio of 57.3%. Significant reserve strengthening for voluntary property insurance has been slightly offset by stronger underwriting results for accident line and for financial risks insurance in 9M16.

Under Fitch's Prism factor-based capital model, Belgosstrakh's risk-adjusted score was 'Adequate' based on 2015 results. Belgosstrakh's statutory solvency margin, assessed similarly to Solvency I principles, was 11x at end-9M16 (2015: 13x).

Belgosstrakh's investment portfolio is concentrated in sovereign assets. The ability to achieve better investment quality is limited by the narrowness of the Belarus capital market and strict regulation of Belgosstrakh's investment policy.

Any change in Belarus's Local Currency Long-Term IDR is likely to lead to a corresponding change in the insurer's IFS rating.

Any significant change in the insurer's relationship with the government would also be likely to have a direct impact on the insurer's ratings
Issuer: Belgosstrakh
Issuer profile:
Belarusian Republican Unitary Insurance Company "Belgosstrakh" is the biggest insurance company of the Republic of Belarus. Belgosstrakh was founded by the Council of Ministers of the Republic of Bel... more
Outstanding issues:
Issuer rating:
Fitch RatingsB-/StableLT Int. Scale (foreign curr.)11/25/2016