OREANDA-NEWS. Fitch Ratings has affirmed three state-owned Belarusian insurers' Insurer Financial Strength (IFS) ratings at 'B-' with Stable Outlooks. The affected insurers are Belarusian Republican Unitary Insurance Company (Belgosstrakh), Belarusian National Reinsurance Organisation (Belarus Re), and Export-Import Insurance Company of the Republic of Belarus (Eximgarant).

KEY RATING DRIVERS
The rating reflects the insurers' 100% state ownership. The ratings also reflect the presence of guarantees for insurance liabilities under compulsory lines, the insurers' leading market positions in their segments, their sustainable profit generation and the fairly low quality of the insurers' investment portfolio.

Belgosstrakh reported strong net income of BYR643bn in 2014 (2013: BYR752bn), supported by both underwriting and investment results. This confirmed that the improvement of the underwriting result in 2013 was not just a one-off event due to a shift in that year to the accrual method from the cash method. Belgosstrakh remains the market leader and the exclusive provider of a number of compulsory lines, including state-guaranteed employers' liability, homeowners' property, agricultural insurance and a number of other more minor lines.

Belarus Re continued to report underwriting profitability in 2014, although property insurance losses caused the combined ratio to weaken to 74% in 2014 from 48% in 2013. The reinsurer's net income continues to be under significant pressure from the environment of hyperinflation in Belarus, which resulted in an IFRS accounting loss of BYR211bn in 2014 (2013: BYR193bn). However, an improved investment result helped the company narrow its net loss to BYR24bn in 2014 from BYR88bn in 2013. Belarus Re continues to enjoy its monopoly in the reinsurance market in Belarus.

Eximgarant's net profit weakened to BYR9bn in 2014 from BYR79bn in 2013, which reflected a negative underwriting result in 2014 and a weaker combined ratio at 103% (2013: 67%). This deterioration was driven by the loss ratio component. Eximgarant continues be the exclusive national provider of state-guaranteed export insurance and a traditional non-life insurer.

Based on Fitch's assessment of their risk-adjusted capital adequacy all three insurers are adequately capitalised for their ratings. The insurers maintain exceptionally strong nominal levels of capital relative to their current business volumes. The EU Solvency I-like statutory ratio at end-2014 was 14x for Belgosstrakh, 72x for Eximgarant and 47x for Belarus Re. However, Fitch believes that the insurers' economic capital adequacy is not nearly as strong as the statutory solvency ratio implies since the regulator's formula does not take asset risk into account. Risks on the asset side of their balance sheets remain highly concentrated and directly linked to the sovereign credit profile.

RATING SENSITIVITIES
Changes in Fitch's view of the financial condition of the Republic of Belarus or any significant change in the insurers' relationship with the government would be likely to have a direct impact on their ratings.