Credibility rating for life insurance companies (general methodology)

Methods of assessing insurance companies specialized in life insurance were developed by Expert RA specialists in 2007. They were based on universal methodology of analyzing insurance companies set by Expert RA specialists in 1997 and approved by PriceewaterhouseCoopers in 2001. New methodology took into account special features of life insurers, related to dealing with “long” money. Comparing to universal methodology special attention is paid to quality of company’s investment portfolio, presence of risk-management system and financial potential of founding companies.

Official book-keeping and statistical reporting (current and two previous years), IAS reporting, management reporting data, additional company data, interview with company’s CEO and open sources of information are used as sources of information for analysis of life insurers’ financial credibility.

Analyzing financial stability of life insurers, our agency assesses their current activities and dynamics (last two years). Analysis of financial status of a company takes into consideration market positions and external stability factors, chief features of company’s insurance portfolio, financial flows, investment strategy, business potential and company’s management quality.

Market position and external factors

Absolute volumes of consolidated assets, own funds and insurance contributions, company’s status at the insurance and life insurance markets, geography of activity and economic potential of regions of presence are taken into consideration.

Insurance portfolio features

Insurance portfolio features are taken into consideration by types of insurance and by clientele quality and structure. Re-insurance policy is also analyzed: its validity, quality and efficiency.

Financial flows

Several areas are analyzed: liquidity indicators, adequacy of own funds, assets and liabilities management quality, level and dynamics of accounts payable and receivable, operation activity indicators (ratios of profitability, un-profitability and operation expenses).

Investment strategy

Life insurer investment strategy provides for analysis of its investment portfolio for credibility, liquidity, profitability and diversification. Special attention is paid to presence, reasoning and efficiency of risk-management system, required to manage market, credit, interest, currency and liquidity risks.

Business potential and management quality

Financial potential of company’s owners, its strategy and development plans, management quality, relations with supervision bodies, transparency level, product lines and market policy are taken into consideration.