Russian insurer OJSC Sogaz’s long term counterparty credit and financial strength rating has been raised to investment grade ‘BBB-‘ up from ‘BB+’ by Standard and Poor’s. The outlook is stable. At the same time, the Russian national scale rating was affirmed at ‘ruAA+’.
The upgrade reflects on-going improvements in Sogaz’s capitalization and our view of Sogaz’s improved competitive position in Russia.
The ratings reflect Sogaz’s good competitive position and adequate capitalization. The ratings also reflect the on-going support and our assessment of probability of extraordinary support for Sogaz from OAO Gazprom (BBB/Stable/A-2), the world’s largest natural gas company, with which Sogaz has strong ties.
These positive factors are offset by the relatively high credit risk in Sogaz’s investment portfolio, Sogaz’s expansionary policy to acquire noncore assets, and the high industry risk associated with operating in the Russian insurance market.
The stable outlook reflects our expectation that Sogaz will continue its strong relationship with Gazprom and its good operating performance. We expect Sogaz to achieve and maintain at least good risk-based capital and preserve at least a marginal investment portfolio quality. In our view, Sogaz’s insurance portfolio diversity will improve, but Gazprom will remain its largest client.
A positive rating action could result if the quality of the company’s investments improves significantly, and our assessment of its exposure arising from industry and county risk lessens, all other factors being equal.
Conversely, any significant and sustained deterioration in earnings, capitalization, or the quality of the company’s investment portfolio could lead to a negative rating action. Negative rating actions could also follow if we perceive a diminution of Gazprom support.
Source : Standard&Poor’s
