S&P Rates Russian Insurer Neftepolis ‘B-‘

October 29, 2003

Standard & Poor’s Ratings Services announced that it has assigned its ‘B-‘ long-term counterparty credit and insurer financial strength ratings to Russian insurer oOo Strakhovaya Kompaniya Neftepolis, with a stable outlook. It also noted that it had assigned its ‘ruBBB-‘ Russia national scale rating to the insurer.

“The ratings on Neftepolis reflect the company’s concentration in and exposure to the underdeveloped and rapidly growing Russian insurance market; marginal capitalization; unproven business model; and short operating track record,” stated S&P credit analyst Ashley Gill. “These factors are partially mitigated by Neftepolis’ strong business position in the energy sector, particularly in relation to the risks of its parent, Rosneft; good operating performance; and sound management.”

“Neftepolis is a composite insurance company in the Russian Federation (foreign currency BB/Stable/B, local currency BB+/Stable/B),” said S&P. “The company is wholly owned by Oil Company Rosneft (OJSC) (Rosneft; B/Negative/–), the state-owned, vertically integrated oil company.” The stable outlook therefore reflects S&P’s “expectation that Neftepolis will provide ongoing support to Rosneft through its captive insurance activities and significantly increase its insurance sales to Rosneft employees.”

It noted, however that “for noncaptive business, Neftepolis faces a number of challenges, not least its short operating track record. Growth in this area is expected to be controlled to within the company’s operational capabilities and capital resources.”

S&P said it expects the company to “maintain profitability, albeit at a reduced level from that seen in 2002. ROR is expected to remain in excess of 20%. Premium volume growth is to remain controlled, although volatility cannot be ruled out due to the company’s potential future involvement in major energy projects.”

It also “expects Neftepolis to maintain a high capital adequacy ratio, despite potential volatility arising from fluctuating premium levels and the ongoing industry risk.”

Topics Carriers Russia

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