OREANDA-NEWS. Fitch Ratings has downgraded Russian Insurance Centre (Russia)'s (RIC) Insurer Financial Strength (IFS) rating to 'B-' from 'B' and National IFS rating to 'BB-(rus)' from 'BBB-(rus)'. The Outlook on the ratings is Negative.

Fitch is simultaneously withdrawing the ratings, as the agency has not been able to obtain sufficient information to maintain them. Accordingly, Fitch will no longer provide ratings or analytical coverage for RIC.

KEY RATING DRIVERS
The downgrade of the ratings reflects a significant weakening of RIC's liquidity position and underwriting performance. The ratings have been withdrawn as Fitch has not been able to obtain sufficient information about the composition of RIC's investment portfolio.

RIC reported a sharp contraction of its liquid investments at end-2014, when the proportion of cash and bank deposits in the investment portfolio fell to 2%, from 18% at end-2013. Although this increased to 6% at end-1Q15, there is now significant concentration risk, as the increase is all held with a small unrated local bank. Fitch has been unable to determine the composition of the non-cash investment portfolio, which has increased as a result of investing cash generated by the insurance operations in 2014 and cash withdrawals from bank accounts.

The sharp contraction of cash and bank deposits occurred in the context of positive operating cash flow in 2014, which was supported by a 110% growth in net premiums written and an apparent reduction in claims paid, reflecting an increase in claims case reserves.

RIC also reported a significant weakening of its underwriting profitability, with a larger loss of RUB166m in 2014, compared with a RUB84m loss in 2013.