RUSSIAN INSURER DOWNGRADED AS MARKET DETERIORATES

Deteriorating trading conditions in the Russian insurance market have triggered several rating actions on local insurance companies. Fitch Ratings said lower premium volumes, pressure on rates and volatile investment performances will impact on the sector’s profitability in 2009. The financial strength rating of Moscow Insurance Company has been downgraded to BB- from BB on international ratings and national ratings have been downgraded from AA- to A+, with the outlook on both revised to negative. Fitch said the downgrade reflects the financial positions of the firm’s principal shareholders, the Bank of Moscow and the city of Moscow. In other rating actions, Fitch placed the financial strength rating of Rossiya Insurance Company on rating watch negative and revised the outlook on the ratings of three companies - AlfaStrakhovanie PLC, JSIC Gefest and Russian Insurance Center – to negative from stable. At the same time, Fitch affirmed the ratings of ACE Insurance Company CJSC and Sogaz with stable outlooks. Fitch said underwriting profitability in the Russian insurance market will be compromised by competition for a smaller volume of business and recessionary pressures, such as an increasing number of fraudulent claims. Fitch said it is also concerned about the Russian insurance market’s exposure to investments. “The generally low quality and low liquidity of Russian insurers’ investment portfolios may expose some companies to further investment losses, due to the increasing rate of defaults on corporate bonds and the continuing volatility of Russian stock markets,” Fitch said.