Best Rates Ukraine’s Lemma ‘B+’; ‘bbb-‘

A.M. Best Co. has assigned a financial strength rating of “B+” (Very Good) and an issuer credit rating of “bbb-” to Ukraine’s Lemma Insurance Company with a stable outlook.

“The ratings reflect Lemma’s strong risk-adjusted capitalization for 2004 and 2005, which is supported by good retained earnings,” said Best. The rating agency also said it “believes this level of risk-adjusted capitalization will continue in the next two years. It is expected that Lemma’s business profile will still be dominated by financial risk insurance (50 percent of gross premiums written), even though this line of business is declining. A 10 percent growth is expected to be achieved from cargo, property and medical insurance products in the next two years.”

However, Best also signaled its belief that “Lemma has a strong reliance upon financial risk insurance, thereby exposing the company to changes in the tax regime. Lemma will concentrate on sustaining and developing its current position in the Ukraine, where it has a leading market position, along with developing the existing products for the market. Overall moderate growth is anticipated due to tax environment uncertainty in the Ukraine. Lemma will continue to develop opportunities in foreign markets as well, though this will still only be a small proportion of total income.

“In A.M. Best’s opinion, Lemma’s combined ratio is expected to increase from 70 percent to 76 percent over the next two years. This is emanating from the development of group medical insurance, which is anticipated to have a higher loss ratio. Also, current products tend to have volatile claims ratios for Lemma. There should be an improved performance from the company as it consolidates its business profile.”