S&P confirmed the ratings of LEXGARANT Insurance Company LTD at "B" level and "ruA-"

S&P Global Ratings has confirmed the financial strength rating and the counterparty rating of LEXGARANT Insurance Company LTD at level "B" and a rating on a national scale at "ruA‒". The forecast of ratings change ‒ "Stable".

The rating reflects, on the one hand, higher than previously expected financial results of the company and, on the other hand, the concerns of the Agency regarding the sustainability of these positive changes. In 2015, the volume of insurance gross premiums of LEXGARANT amounted to 540 million rubles ($8 million). Exchange rate changes in 2015 resulted in a significant growth of insurance in rubles, resulting in the expense ratio of the company dropped sharply. In this regard, the combined ratio (loss ratio plus expense ratio) at the end of 2015 decreased to 77.2%, which is significantly below the average for the last five years (149%). A positive impact on the indicators of the insurer had the fact that the company receives a significant portion of insurance premiums in foreign currencies, while the majority of costs are denominated in rubles. In the baseline scenario, the Agency assumes that the company will be able to control the expense ratio and maintain the combined ratio at around 90% in 2016-2017 provided that the insurer will retain the current volume of business and will not incur substantial losses from insurance operations (especially in the segment of aviation risks insurance, where the loss rate is difficult to predict).

S&P continued to assess the business risk profile of LEXGARANT as "sensitive to the impact of market factors". Negative impact on the rating provides a high level of industry and country risk in Russia and a "satisfactory" assessment of the competitive position of the company. Assessment of financial risk profile as "minimally acceptable" is defined small in absolute terms, capital base (less than $15 million) and "moderate" risk position, due to the high concentration of the investment portfolio and the potential volatility of open foreign exchange positions.

As a positive factor S&P considers that in the last two years the company strategy has become more consistent and predictable.