Moody’s downgrades Allianz Russia to Baa2; stable outlook

Moody's has downgraded the global-scale insurance financial strength rating (IFSR) of OJSC IC Allianz (Allianz Russia) from Baa1 to Baa2, but maintained a stable outlook, following continued pressures in underwriting profitability.
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 EUR 678 mln, the rating agency said, adding that there were “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 consolidated premiums by around 20% by 2014, “the group's underwriting profitability is likely to remain pressurized in the short to medium-term as competitive pressures are likely to remain difficult.
With 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,” Moody’s said.