A.M. Best Affirms Ratings of SOGAZ, Insurance Company OJSC
LONDON -- June 20, 2013
A.M. Best Europe – Rating Services Limited has affirmed the financial strength
rating of B++ (Good) and issuer credit rating of “bbb” of SOGAZ, Insurance
Company OJSC (SOGAZ) (Russia). The outlook for both ratings is stable. SOGAZ
is the ultimate parent of the SOGAZ Group, which provides a range of insurance
and non-insurance related services.
The ratings of SOGAZ reflect its good consolidated risk-adjusted
capitalisation, consistently strong operating results and strong competitive
position as a commercial property insurer. The ratings also consider the high
country risk associated with its operations in Russia and its relationship
with its major shareholders, BANK “ROSSIYA” and OAO Gazprom (Gazprom), the
world’s largest natural gas company.
SOGAZ’s consolidated risk-adjusted capitalisation remains at a good level,
despite significant growth in 2012. Growth was derived from all lines of
insurance, particularly from the property account, which increased by 37%,
resulting in gross written premium (GWP) of RR 84 billion in the year (2011:
RR 60 billion). However, the rise in premium volume was materially offset by
the increase in the group’s capital base due to its strong internal capital
generation. SOGAZ’s investments in non-core (strategic) assets have previously
been cited as a source of potential downwards pressure on consolidated
risk-adjusted capitalisation. A.M. Best understands that SOGAZ’s strategy will
focus on its core insurance operations going forward, and has noted the steps
taken by the group to de-risk its investment portfolio.
SOGAZ’s operating performance remains strong. Consolidated pre-tax profits
increased by 56% to RR 14 billion in 2012, owing to the lower impact of large
single risk and weather-related losses that affected 2011’s technical results.
Additionally, investment earnings of RR 7 billion (2011: RR 4 billion) were
bolstered by higher invested assets, with some contributions from realised and
unrealised (fair value) gains.
SOGAZ maintains its strong competitive profile as a commercial insurer,
supported by its excellent brand and long-standing relationships with large
Russian corporations. SOGAZ intends to rapidly expand its regional and retail
portfolio, in line with its strategic objective to be a universal insurer.
Regional and retail business (combined), accounting for 22% of consolidated
GWP in 2012, is expected to represent around a third of SOGAZ’s portfolio in
the near term. A.M. Best notes SOGAZ’s rapid expansion plans into a highly
competitive segment of the market, and as such, A.M. Best will closely monitor
the performance associated with its growth.
A.M. Best considers Gazprom’s significant influence over SOGAZ to remain. In
addition to being SOGAZ’s largest single-name underwriting exposure
(representing 26% of GWP in 2012), Gazprom (including affiliates) maintains
significant influence on SOGAZ’s Board of Directors, occupying three seats out
of seven (BANK “ROSSIYA” maintains two seats). Gazprom maintains a secure
Positive rating actions could occur if SOGAZ continues to produce strong
operating results whilst maintaining risk-adjusted capitalisation at a
supportive level. Additionally, further progress in its enterprise risk
management framework, along with a sustained reduction in its investment risk
profile, will support upwards rating pressure.
Negative rating actions could occur if there was a rise in SOGAZ’s investment
risk profile to a level higher than A.M. Best’s expectations, or lower than
expected operating performance, particularly in relation to its regional
expansion. Deterioration in country risk fundamentals could also have a
negative impact on SOGAZ’s ratings. Additionally, a rise or decline in Gazprom
or BANK “ROSSIYA”’s credit profile is also likely to have a positive or
negative impact on SOGAZs ratings.
The methodology used in determining these ratings is Best’s Credit Rating
Methodology, which provides a comprehensive explanation of A.M. Best’s rating
process and contains the different rating criteria employed in the rating
process. Best’s Credit Rating Methodology can be found at
In accordance with Regulation (EC) No. 1060/2009, the following is a link to
required disclosures: A.M. Best Europe - Rating Services Limited Supplementary
A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best
Company. A.M. Best Company is the world's oldest and most authoritative
insurance rating and information source. For more information, visit
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A.M. Best Company
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