Press Release - OCTOBER 30, 2015

A.M. Best Affirms Ratings of Unity Reinsurance Company Ltd.


CONTACTS:
 Valeria Ermakova
Financial Analyst
+(44) 20 7397 0269
valeria.ermakova@ambest.com

Deniese Imoukhuede
Associate Director, Analytics
+(44) 20 7397 0277
deniese.imoukhuede@ambest.com
Christopher Sharkey
Manager, Public Relations
(908) 439-2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

LONDON - OCTOBER 30, 2015
A.M. Best has affirmed the financial strength rating of B+ (Good) and the issuer credit rating of “bbb-” of Unity Reinsurance Company Ltd. (Unity Re) (Russia). The outlook for both ratings remains negative.

The negative outlook on Unity Re’s ratings continues to reflect the company’s exposure to the fragile macroeconomic conditions in Russia. Although A.M. Best has noted the improving quality of Unity Re’s fixed-income portfolio since 2014, uncertainty remains with regard to the impact of a prolonged weakening of Russia’s macroeconomic environment on Unity Re’s deteriorating operating performance and balance sheet strength.

The rating actions also reflect Unity Re’s adequate risk-adjusted capitalisation and solid market profile in Russia’s reinsurance sector.

Despite the double-digit growth planned for 2015, Unity Re’s risk-adjusted capitalisation is expected to remain at an adequate level, underpinned by its good quality reinsurance protection and solid earnings retention, although tempered by the company’s track record of paying significant dividends to its shareholders. Planned expansion for the year is expected to emanate from Unity Re’s neighbouring Kazakhstan market, following a change in regulation that supports the use of Russian reinsurers that maintain secure ratings. Nonetheless, A.M. Best believes that Unity Re’s balance sheet strength is exposed to the weakness of its risk-management framework, which incorporates an inadequate approach in the monitoring of its risk accumulations.

Unity Re’s underwriting performance continued to deteriorate in 2014, as per a combined ratio of 120.9% compared with a five-year average of 93.8%. This was primarily due to a number of large industry losses, mainly arising from Unity Re’s commercial property portfolio, and the poor performance of a large motor treaty, which has subsequently had its terms modified to restore its profitability. Additionally, technical results were affected by some strengthening to prior-years’ reserves for motor and property business. For the first half of 2015, Unity Re reported an improved combined ratio of 93.3% (first half of 2014: 105.8%), owing to a more normalised level of claims activity. However, A.M. Best remains concerned about the impact of the protracted softening of market conditions on deteriorating rates, and the effect of rising inflation on higher claims costs, which could result in a further worsening of Unity Re’s technical performance.

In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.

This press release relates to rating(s) that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best’s Ratings & Criteria Center.

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AMB# Company Name
091390 Unity Reinsurance Company, Ltd.