S&P Upgrades Russia’s Ingosstrakh to ‘BBB-‘; Outlook Stable

June 7, 2007

Standard & Poor’s Ratings Services has raised its long-term counterparty credit and insurer financial strength ratings on Russian insurer Ingosstrakh Insurance Co. to “BBB-” from “BB+,” and affirmed its “ruAA+” Russia national scale rating. The outlook is stable.

“The upgrade reflects a noticeable improvement in Ingosstrakh’s investment profile and a positive track record by Ingosstrakh’s management team,” stated S&P credit analyst Tatiana Grineva.

S&P also cited the “progressive strengthening of Ingosstrakh’s competitive advantages in The Russian Federation (foreign currency BBB+/Stable/A-2, local currency A-/Stable/A-2, Russia national scale rating ruAAA) through intensive growth of its personal lines portfolio and a sustained good level of operating performance,” as additional factors supporting the upgrade.

However S&P also noted that “company’s financial flexibility and high industry and country risks” should be taken into account as offsetting factors.

S&P explained that the stable outlook “reflects the expectation of sustained good operating performance, with a net combined ratio of less than 100 percent, ROE of 15 percent, and maintenance of capital adequacy (according to Standard & Poor’s risk-based capital model) within the ‘BBB’ range.”

S&P also indicated that in the insurer “still faces challenges to maintain its capitalization in line with its ambitious growth levels and the execution risk of becoming the leading Russian insurer by increasing its premium income by 2009 to $1.8 billion-$2.5 billion.

“Upside potential for the ratings is limited in the medium term, unless Ingosstrakh can demonstrate its capacity to manage country and industry risk, possibly through increased transparency associated with an IPO. Conversely, any significant and sustained deterioration in earnings, capitalization, or quality of the investment portfolio over the medium term may lead to the ratings being lowered.”

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