OJSC "RUSSIAN REINSURANCE COMPANY"
A
lexander III receiving Heads of
Provinces at Petrovsky Palace courtyard in Moscow Ilya Efimofich Repin 1885 - 1886 Oil on canvas. 294 Ń… 490,5 The State Tretyakov gallery. Moscow.
OJSC "RUSSIAN REINSURANCE COMPANY"
T
he painting depicts the Emperor Alexander III and his family surrounded by courtiers and ministers immediately after the coronation on May 5th 1883 delivering the speech before the Heads of all Russian Provinces. On the background is the Family of the Emperor: the Empress Maria Feodorovna and children - Prince Nikolai, Georgy, Ksenia, Mikhail, Olga.
The Painting was commissioned to Ilya Repin in summer 1884 by the Ministry of the Imperial Court. The cartouche of the painting frame contains the extract of the speech of the Emperor.
Introduction
L
ast year Russian Reinsurance Company celebrated its 20th anniversary. It is a relatively small period, in the scales of international business, but it has a completely different duration in the specific historic context. Having begun to work in the emerging market, in two decades the Company went all the way from primitive means to advanced technologies, from local risks to transcontinental operations. From the very beginning of its activity Russian Reinsurance Company adhered to the conservative policy and placed a stake on establishing long-term partnership relations and professionalism. Today, two decades later, a glance back is enough to make sure that the strategy was chosen correctly. A focus on business profitability based on strict control in respect of the portfolio formation, underwriting, retrocessional protection and investments determines stable financial results under the conditions of reduction of premium rates and strengthening of competition. Russian Reinsurance Company is a national reinsurer with a wide international participation. This idea, formulated as early as in the middle 90s, is now put into life and allows to
combine extensive international experience with the specifics of the promising Russian market. Strict underwriting is one of the most important principles of the Company’s operation. It has contributed to multiple increases of the Company’s capital performed mainly through profit capitalization. For the twenty years of its operations Russian Reinsurance Company has demonstrated the ability to systematically and sustainably develop under challenging conditions. The last year was not an exception. Despite the extremely unfavorable market conditions, the volume of the reinsurance premiums collected by the Company in 2012 increased by 5.7% and exceeded 580 million rubles. Premium increst was achieved through the expansion of the existing reinsurance programs and exploration of new territories. The permanent efforts aimed at maintaining the financial stability of the Company resulted in A.M.Best reaffirming the financial strength rating of В+ (Good) and the issuer credit rating of bbb-.
OJSC "RUSSIAN REINSURANCE COMPANY"
History 1992 1994 1994 1996 1999 2001 2002
Russian Reinsurance Company was established in Moscow as an initiative by the Russian Union of Insurers Eduard Ryabinin was appointed Chairman of the Board of Directors Alte Leipziger Europa Beteiligungsgesellschaft AG (Germany) became the Company’s first foreign shareholder American International Group Inc. and Marsh&McLennan Risk Capital Holdings (USA) acquired shares of Russian Reinsurance Company A representative office was opened in Vladivostok Alte Leipziger Europa Beteiligungsgesellschaft AG transferred its shares in Russian Reinsurance Company to ERGO Europa Beteiligungsgesellschaft AG (Munich Re Group)
2003 2006 2007 2008 2011
Michael Handler was elected Chairman of the Board of Directors of Russian Reinsurance Company ACE Group (Great Britain) acquired 15,8% of shares in Russian Reinsurance Company from ERGO Group (Germany) International rating agency A.M. Best assigned Russian Reinsurance Company a financial strength rating of B+ (Good) and an issuer credit rating of bbb- for the first time American International Underwriters (USA) and ACE Group acquired a 15% shares of Russian Reinsurance Company from Marsh&McLennan Risk Capital Holdings The Share Capital increased from 120 up to 480 million rubles.
A representative office was opened in Kiev (Ukraine) OJSC "RUSSIAN REINSURANCE COMPANY"
Shareholders
T
he Company’s key shareholders are ACE Russia Investments Limited and Chartis International LLC holding 23,3 and 22,5 percent of shares respectively and 54,2 percent of shares are held by Russian corporations and individuals. The participation of the leading western companies in Russian Reinsurance Company’s operations is not limited to capital investments. The intellectual support from our foreign directors, who are professionals of the highest level, represents a considerable contribution to the development of the Company. ACE Russia Investments Limited Chartis International LLC Management Others
23.3% 22.5% 48.2% 6.0%
OJSC "RUSSIAN REINSURANCE COMPANY"
Board of Directors
Management Board
Chairman of the Board of Directors Michael Handler Managing Director and Chairman, Continental Europe, Guy Carpenter, Inc., Zurich
Andrey Polyakov Managing Director, PhD in Economics
Directors:
Maria Morozova Business Development and Client Management Department Manager
Andrey Polyakov Managing Director of Russian Reinsurance Company, PhD in Economics, Moscow
Teymuraz Batiashvili Executive Director, PhD in Economics
Mikhail Koulzhik Chief Underwriting Officer
Yuri Golubovsky Moscow Andrew Kendrick Chairman and Chief Executive Officer (CEO) of ACE European Group, London Christos Adamantiadis General Manager, Arabia, Middle East and North Africa, Chartis Insurance OJSC "RUSSIAN REINSURANCE COMPANY"
International Advisory Board
T
he International Advisory Board of the Company was established in 2006. It includes the world’s leading reinsurance experts who provide comprehensive assistance to the Company management in solving strategic and tactical tasks related to the Company’s operations. Possessing a profound knowledge and extensive work experience in the developing markets, the IAB members watch the Company’s activities and on a regular basis consult the board on a wide range of theoretical and practical issues, which include cyclic processes in reinsurance and the peculiarities of portfolio management to counter catastrophic events.
Hans-Dieter Knuettel Managing Director, I.C.A.C., Germany Bengt Westergren Board Director, Senior Advisor of the East West Institute, New York, Brussels, Moscow Serge Osouf Senior Advisor, ACE Group
OJSC "RUSSIAN REINSURANCE COMPANY"
Đž
Partners
The client policy of Russian Reinsurance Company relies on building trust-based long-term relationships with partners. Developing such cooperation and developing relationship with new clients whose business approaches are compatible with the strategic vision of the Company is the most important goal of the Company’s management and employees. At present over 130 insurers use the financial capacities of Russian Reinsurance Company and its services in risk management and claims settlement. Using the deep knowledge of the partners’ business, the employees of Russian Reinsurance Company develop the optimal reinsurance program for each of them, based on the considerations of reliability and expedience. Good understanding of the current situation in the market and its dynamics allows the Company to offer adequate terms of reinsurance. Russian Reinsurance Company has an extensive base of risks at its disposal practically for all types of industrial facilities and construction and installation projects, which allows the Company to make unique offers. Having direct access to the advanced international practices, Russian Reinsurance Company deems it its duty to extend the international experience to the Russian market. For this purpose the employees of the Company organize conferences and seminars for their clients in relation to urgent issues in the insurance and reinsurance business.
Regional premium portfolio structure Regions Russia Former Soviet Union Middle East and Northern Africa Europe Asia Pacific Other Regions
2012
2011
58.0% 13.1% 15.3% 4.3% 8.8% 0.5%
67.9% 13.9% 13.1% 2.8% 2.1% 0.2%
OJSC "RUSSIAN REINSURANCE COMPANY"
Geography
A
s part of its portfolio diversification program Russian Reinsurance Company continues systematically to explore overseas markets. In 2012 the share of Russian Reinsurance Company’s Asian region operations increased by 6,7% in comparison with 2011, the premium written in Europe grew by 2% and that in the Middle East grew in the same way. Despite the expansion of the geographical borders of the Company’s operations, Russia and CIS countries represent its key market, they accounted for 71.1% of the premium portfolio.
The effective system of risk management, using the latest technologies, allows the Company to promptly analyze regional portfolios and, thus, exercise permanent control over the balance and stability of the expanding business. Building relations with new clients, Russian Reinsurance Company strives not for obtaining here-and-now benefits, but for building long-term, promising partnerships. By focusing on profitability as the most important feature of the portfolio rather than its sheer volume, Russian Reinsurance Company tracks the quality of accepted risks with great deliberation. For this purpose all underwriting is carried out centrally in the head office in Moscow. The versatility of Russian Reinsurance Company’s team of professionals and centralized underwriting reinforced by the marketing activity of the representative offices in Kiev and Vladivostok, allows the Company to position itself as a reliable partner in the key and international markets.
OJSC "RUSSIAN REINSURANCE COMPANY"
Rating
I
n 2012 A. M. Best agency affirmed once again the international ratings of Russian Reinsurance Company, i.e. the financial strength rating of В+ (Good) and the issuer credit rating of bbb- . The outlook for both ratings is stable. The ratings reflect the excellent operation results and good risk-adjusted capitalization. The last year’s reaffirmation of the ratings is the result of Russian Reinsurance Company using its weighted conservative policy, which ensures stable work and high financial stability even under unfavorable market conditions.
OJSC "RUSSIAN REINSURANCE COMPANY"
Reinsurance protection
T
he principle of long-term mutually beneficial cooperation, to which the Company adheres in relations with its clients, is to the full extent applicable to the creation of the retrocession protection. Russian Reinsurance Company places risks with the companies of the highest reliability category, with most of which it has been cooperating for over 15 years. In 2012 the parameters of Russian Reinsurance Company’s reinsurance program remained unchanged. The maximum coverage for Middle East and Southeast Asia for property, energy and engineering risks makes US$ 3 million.
Coverage for Russia and CIS countries for property, power industry energy and engineering risks, including machinery breakdown and electronic equipment and business interruption, amounts to up to US$ 50 million. A US$ 3 million cargo reinsurance contract covers cargo risks transported by any means of transport. Special purpose plant and machinery and rolling stock risks coverage makes US$ 2 million. The maximum retention for personal types per one insured person makes US$ 500 thousand, the Company offers a capacity of up to US$ 2.5 million for event programs to its clients.
OJSC "RUSSIAN REINSURANCE COMPANY"
Premium income and losses 600 000
450 000
300 000
150 000
0
2012
2011
Gross written premium
2010 Net written premium
2009
2008 Claims incurried, net of reinsurance
Equity and Share Capital
I
n 2012 Russian Reinsurance Company’s equity grew by 4.65% for the year and reached 676.8 million rubles. The Company’s net profit for the reporting year amounted to 11.1 million rubles.
Authorized capital and equity growth (thousand RUB) 2012 2011 2010 2009 2008
676,747 640,526 560,304 523,065 412,690
OJSC "RUSSIAN REINSURANCE COMPANY"
Company structure
T
he current structure of Russian Reinsurance Company is optimal from the point of view of communication between business units and operational effectiveness. The activity of all departments is closely interrelated and is controlled directly by the Company’s Board of Management. All underwriting of Russian Reinsurance Company is concentrated in one subdivision. The interchangeability of specialists and absence of division by business lines, type of reinsurance or regional criteria allows the Company to manage the portfolio flexibly under the conditions of the «soft» market and ensure profitability, developing territorial diversification. The activity of the Underwriting Department is aimed at creating a balanced and profitable portfolio through thorough selection of risks with account of the approaches and principles formulated for the period of the Company’s work. The area of responsibility of the Department’s employees includes permanent monitoring of the market situation, tariff rates in the target sectors of business, dynamic analysis of the loss ratio of the Company portfolio and portfolios of partners. Besides, close attention is paid to qualitative processing of the incoming information and replenishment of the information
arrays of the Company, used in processing each new request for reinsurance. The Business Development and Client Management Department is responsible for strategic planning and development of new business areas. In conjunction with the underwriting department it participates in the development of tailor-made reinsurance solutions by coordinating relations with the Company’s partners. Its tasks include monitoring of the current state and development trends of the markets and control of representative offices activities. The department is engaged in preparing and holding lectures and seminars for the different lines of insurance and specifics of claims settlement. It holds work classes and training for representatives of Russian Reinsurance Company’s partners. The Technical Accounting and Information Technologies Departments are responsible for all types of accounting, research and implementation of software solutions and optimization of the Company’s operations, financial and economic analyses and portfolio.
OJSC "RUSSIAN REINSURANCE COMPANY"
Company structure (scheme)
1.BOARD OF MАNAGEMENT 2. BUSINESS DEVELOPMENT AND CLIENT MANAGEMENT DEPARTMENT VLADIVOSTOK [REPRESENTATIVE OFFICE] KIEV, UKRAINE [REPRESENTATIVE OFFICE] RISK ASSESSMENT & LOSS SETTLEMENT
4. TECHNICAL ACCOUNTING & IT DEPATMENTS
3. UNDERWRITING DEPARTMENT ENERGY ENGINEERING, MB, BI INDUSTRIAL AND PERSONAL PROPERTY CARGO SPECIAL PLANT & MACHINERY MOTOR (CASCO, TPL, PA) LIABILITY PERSONAL ACCIDENT TERM LIFE TRAVELLERS
5. GENERAL ACCOUNTING
Personnel
I
n modern business, success and professionalism are synonyms. Hence, the qualification of the Company personnel and its on-going improvement are the matter of consistent concern for the Company Management. All Russian Reinsurance Company’s employees are highly educated specialists with extensive experience and fundamental knowledge in insurance and reinsurance. Many have expert knowledge in the spheres corresponding to the major lines of the Company’s portfolio, i.e. machine building, energy, construction and medicine. The integral part of our personnel policy is the systematic training of our employees at the world leading insurance and reinsurance companies. Their introduction to the international reinsurance experience allows Russian Reinsurance Company to go the most effective way and to use advanced technologies in its business.
OJSC "RUSSIAN REINSURANCE COMPANY"
Portfolio structure and loss ratio
I
n 2012 the Russian market conditions remained extremely unfavorable, however, the balanced underwriting policy and mastering of new regions allowed Russian Reinsurance Company to achieve positive results even in this difficult situation. The Company’s gross premium increased by 5.7% for the year and reached 580.3 million rubles. The net premium grew by 8.6% to 425.4 million rubles. There were no substantial changes in the structure of the Company’s portfolio in the reporting period. Following the Company’s initial decision to specialize in Property, Energy and Engineering, Russian Reinsurance Company consistently strengthens its position as a recognized underwriter in this sphere. The overall share in this area remained at its former level in 2012 and made about 77%.
Last year, property line of business accounted for 65.3% of premiums (62.62% — in 2011), and engineering risks — 11.71% (14.95%). The share of personal accident and health line of business decreased for the year from 5.03% to 3.49%, liability reinsurance — from 0.76% to 0.74%. The share of cargo reinsurance increased from 3.04% to 3.76%, special purpose plant and machinery — from 1.88% to 3.13%. At the same time the share of motor reinsurance did not change in comparison with 2011, having made 11.88%. Since the underwriting policy of Russian Reinsurance Company is oriented first of all to profitability, the portfolio average loss ratio remained significantly lower than the market average in 2012 and amounted to 56.5%.
OJSC "RUSSIAN REINSURANCE COMPANY"
Portfolio structure and loss ratio (Diagramm)
Property Engineering Motor Cargo Travellers/Personal Accident Special purpose plant & machinery Liability
2012 65.30% 11.71% 11.88% 3.76% 3.49% 3.13% 0.74%
2011 62.62% 14.95% 11.72% 3.04% 5.03% 1.88% 0.76%
Investments
T
he main principles of Russian Reinsurance Company’s investment policy are reliability and liquidity. Based on this, the Company invests money into deposits with the most reliable banks and into real estate. In 2012 the Company’s investment income grew by 96.5% and exceeded 33.9 million rubles. This considerable growth was provided by the most effective real estate management.
OJSC "RUSSIAN REINSURANCE COMPANY"
Audit report
W
(Extract)
e, ZAO BDO have audited the financial statements of OJSC Russian Reinsurance Company which comprise the statement of financial position as at 31 December 2012, the profit and loss statement, the statement of changes in equity, the statement of cash flows for the year then ended, summary of enclosures to the statement of financial position and profit and loss statement and explanatory information for 2012. In our opinion, the financial statements present fairly, in all material respects, the financial position of OJSC Russian Reinsurance Company as at 31 December 2012, and its financial performance and its cash flows for the year then ended in accordance with the requirements of the legislation of Russian Federation in part of accounting reports submission. Partner Larisa V. Efremova March 29, 2013
OJSC "RUSSIAN REINSURANCE COMPANY"
KEY FINANCIAL FIGURES (thousand RUR) 2012
2011
2010
2009
2008
Gross written premium
580,256
548,928
461,932
457,750
486,130
Net written premium
425,366
391,799
327,825
301,794
339,940
Claims incurred, net of reinsurance
244,681
206,953
131,477
112,839
224,031
33,788
7,111
12,740
19,755
34,529
103,413
81,579
168,836
122,926
70,116
11,098
10,537
32,522
42,471
25,095
Investment income Reinsurance operations result Profit after taxation
CAPITAL and RESERVES (thousand RUR) 2012
2011
2010
2009
2008
Share capital
480,000
480,000
120,000
120,000
120,000
Other shareholders’ equity
196,747
160,526
429,707
403,065
292,690
Technical reserves
462,778
435,915
537,213
516,868
593,013
OJSC "RUSSIAN REINSURANCE COMPANY"
FINANCIAL RESULT REPORT JSC ÂŤRussian Reinsurance CompanyÂť for the Year ended 31 December 2012 (in thousand rubles) 2012
2011
Earned insurance premiums - net of reinsurance
432,098
369,463
Insurance premiums of insurance, co-insurance and reinsurance, gross
580,256
548,928
(154,890)
(157,149)
8,771
(26,428)
(2,039)
4,112
Claims incurred, net of reinsurance
(244,681)
(206,953)
Claims on of insurance, co-insurance and reinsurance, gross
(240,547)
(283,074)
(2,939)
(3,298)
67
126,671
(35,513)
126,132
34,251
(173,384)
(121)
1,594
Insurance operations expences - net of reinsurance
(83,910)
(72,913)
Acquisition expenses
(77,576)
(68,114)
(6,334)
(4,799)
9,365
7,111
Insurance other than life insurance
Insurance premiums ceded Change in provision for unearned premiums, gross Change of provision for unearned premiums, reinsurer's share
Claims handling expenses Claims ceded to reinsurer's Change in claims provision, gross Change in claims provisions, reinsurer's share Change in other provision
Insurance operations other expenses Investment income
FINANCIAL RESULT REPORT JSC ÂŤRussian Reinsurance CompanyÂť for the Year ended 31 December 2012 (in thousand rubles)
Expenses on investments Other income on insurance other than life insurance Other expenses on insurance other than life insurance Result from operations on insurance other than life insurance
2012
2011
-
(812)
1,037
16
(10,375)
(15,927)
103,413
81,579
(84,355)
(81,441)
149,878
142,694
(151,986)
(127,679)
16,950
15,153
(5,597)
(5,195)
(2,462)
1,585
(255)
579
11,098
10,537
Income and expenses, not related to insurance operations Administration expenses Other income Other expenses Profit (loss) before taxation Current profit tax including: permanent tax liabilities (assets) Change of deferred tax assets Net profit (loss) * The form and content of the financial statements reflect the reporting requirements applicable under the Russian legislation **Zero index positions are not indicated OJSC "RUSSIAN REINSURANCE COMPANY"
BALANCE SHEET OJSC ÂŤRussian Reinsurance CompanyÂť as at 31 December 2012 (in thousand rubles)
2012
2011
2010
-
-
1
Fixed assets
142,926
145,485
121,550
Investment property
412,746
233,824
189,996
Financial investments (excluding cash equivalents)
230,000
585,534
200,231
Deferred tax assets
2,431
2,686
2,107
Inventory
1,540
1,464
2,720
53,428
21,216
190,488
167,745
143,342
129,767
-
-
63
Cash ad cash equivalents
344,854
77,436
379,328
TOTAL FOR SECTION I
676,747
640,526
560,304
1,355,670
1,210,987
1,216,251
ASSETS I. Assets Intangible assets
Insurance reserves, other than life insurance, Reinsurers' share Receivables Premium deposits with reinsureds
BALANCE
BALANCE SHEET OJSC «Russian Reinsurance Company» as at 31 December 2012 (in thousand rubles)
2012
2011
2010
Share capital
480,000
480,000
120,000
Revaluation reserve for premises and equipment
117,976
92,853
193,168
Reserve capital
19,693
18,000
18,000
Retained earnings
59,078
49,673
229,136
676,747
640,526
560,304
Insurance reserves on other insurance than life insurance
462,778
435,915
537,213
External borrowing
100,385
50,668
63,105
Estimated liabilities
7,961
9,771
10,300
Payables
107,799
74,107
45,329
TOTAL FOR SECTION III
678,923
570,461
655,947
1,355,670
1,210,987
1,216,251
LIABILITIES II. Capital and reserves
TOTAL FOR SECTION II III. Liabilities
BALANCE
WWW.RUSSIANRE.RU
HEAD OFFICE
REPRESENTATIVE OFFICES
Russian Re Business Centre Building 1, 19, Lyalin Pereulok Moscow, 105062, Russia tel: +7 495 933 88 83 fax: +7 495 933 88 85 email: russre@russianre.ru
Vladivostok 3a Sukhanova St., P.O. Box 91-267, Vladivostok, 690091, Russia tel.: +7 4232 43 2254 e-mail: vborisiuk@russianre.ru
Russian Re Business Centre. Building 1, 19 Lyalin Pereulok
Kiev, Ukraine 2a Konstantinovskaya St., Kiev, Ukraine, 04071 tel.: +380440 568 5128 e-mail: drasshyvalov@russianre.ru