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Moody's Rates Insurance Company Universalna (Ukraine) B3

February 14, 2008 | Сbonds

First-time Insurance Financial Strength Rating; Stable Outlook

London, 14 February 2008 -- Moody's Investors Service has today announced
that it assigned a first-time global scale insurance financial strength
rating (IFSR) of B3 to Insurance Company Universalna, based in Kiev,
Ukraine. The rating outlook is stable.

The company is 60% owned by Financial and Investment Energy Holding, whose
main asset is OJSC Concern Galnaftogaz, an oil distribution company.
Universalna is a Top 10 player in the Ukrainian insurance market, with a
good position in the motor market. Motor premiums accounted for 57% of the
company's gross premiums written in 2006.
Universalna's credit strengths include one of the largest agent networks in
Ukraine, a diversified distribution strategy and a relatively high degree of
financial flexibility owing to its status as Ukraine's only publicly-traded
insurer.

However, Moody's notes that these strengths are offset by poor technical
profitability resulting from a high expense ratio and a challenging
operating environment, substantial asset risk with high exposures to
equities and real estate (18% and 51% of the investment portfolio at
year-end 2006, respectively), as well as rapid growth by acquisition, both
in Ukraine and, more recently, internationally. Moody's also notes that
despite recent capital increases, the indebtedness of the company is
relatively high following the issuance of bonds totalling UAH30 million
(EUR4.5 million) at the end of 2006.

Timour Boudkeev, Vice President -- Senior Credit Officer and lead analyst
for Universalna at Moody's, said: "Universalna has been growing at a rapid
pace in recent years, partly by acting as consolidator of regional insurers,
and succeeded in building an extensive agent network in Ukraine. However,
the company has a high cost base, is facing increased pressure on
profitability in some of its core lines of business and has yet to
successfully integrate many of its recent acquisitions. In addition, the
Ukrainian market is becoming increasingly competitive following entry by
sophisticated international players in the last couple of years".

Commenting on what could result in upward pressure on Universalna's
insurance financial strength rating, Moody's mentioned sustainable growth in
the franchise, e.g. becoming a Top 5 retail insurer in Ukraine, a lower
business risk profile with increased diversification and less reliance on
the motor liability business, a track record of profitability, enabling the
company to finance its growth internally, a decrease of high risk and
illiquid assets in the investment portfolio as well as improved
capitalisation and lower financial leverage.

Conversely, negative rating pressure could develop in the event of erosion
of the company's current market position, deterioration of operating
profitability, lower levels of capitalisation and failure to integrate
recent acquisitions.

The following first-time rating was assigned:

Insurance Company Universalna -- insurance financial strength rating at B3,
stable outlook.

Based in Kiev, Ukraine, Universalna is one of the Top 10 Ukrainian insurance
companies. In 2006, Universalna reported Gross Premiums Written of UAH173.5
million (EUR26.1 million) and net income of UAH1.7 million (EUR0.3 million).
Shareholders' equity including minority interests was UAH50.7 million
(EUR7.6 million) as at 31 December 2006.

Company: IC Universalna

Full company nameOJSC Insurance Company «Universalna»
Country of riskUkraine
IndustryFinancial institutions

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