OREANDA-NEWS. June 22, 2007. OJSC ROSNO publishes ROSNO Group’s consolidated financial performance results for the 1st quarter of 2007 under IFRS.

Major financial performance results of ROSNO Group

Aggregate insurance premium collected by ROSNO in the 1st quarter of 2007 equalled $322.3 mln, representing an increase by 42.3%, as compared to the same period of the previous year.

ROSNO’s insurance market share (excluding the schemes) in the 1st quarter of 2007 equalled9.0%, as compared to 6.8 % in 2006. As a result of the growing market share, in the 1st quarter of 2007, ROSNO ranked second in Russia by collected premium (while the group ranked third in 2006).

The results achieved in the 1st quarter of 2007 reflect ROSNO Group’s strategy aimed at more diversified and stable insurance portfolio, as well as increasing share of regions and individuals in the aggregate premium. In the 1st quarter of 2007, the share of regional sales in the Group’s portfolio increased to 26.0% vs. 23.6% in the 1st quarter of 2006. In the 1st quarter of 2007, share of retail insurance increased to 27% against 21% in the 1st quarter of 2006.

The company’s strategic focus on development of retail sales and regional network, as well as the continuing investment in subsidiaries have led to the expected decrease in profitability. Thus, consolidated net profit earned by ROSNO in the 1st quarter of 2007 equalled $2.6 mln, representing a decrease by $9 mln, as compared to the same period of the previous year.

The major reason for profitability decrease was the expected growth of insurance portfolio losses. The aggregate insurance portfolio’s loss ratio, which represents a ratio of actual losses to the insurance premium earned, grew from 49.2% to 62.3% in the 1st quarter of 2007, as compared to the same period of the previous year. This growth of aggregate loss ratio can be attributed to ROSNO’s active expansion in the car insurance sector and in the regions, where loss ratio is higher than in other insurance segments and higher than the Moscow average.
Segmentation

In the 1st quarter of 2007, the share of IC ROSNO in the aggregate premium amounted to 90.5%. (vs. 93.8% for the same period of the previous year). The growing share of subsidiaries can be attributed to growth in the premium collected by such companies as Allianz ROSNO Life, ROSNO Ukraine, and VTB-ROSNO. Furthermore, this trend is in line with the company’s strategy aimed at insurance portfolio diversification and penetration of new promising markets.

Major ROSNO Group activities remain as follows: voluntary medical insurance, car insurance (incl. OMTPL) and property insurance. Their aggregate share in portfolio is 91.6%.

In the 1st quarter of 2007, the share of motor vehicle insurance (including OMTPL) in the Group’s aggregate insurance premium grew to 29.4% from 21.6% in the 1st quarter of 2006, thus demonstrating an increase by 93.5%. Motor vehicle insurance is provided by ROSNO’s head office and its subsidiaries.

In the 1st quarter of 2007, the main drivers of premium growth were as follows: successfully completed large-scale OMTPL advertising, further improvements in the company’s customer service, and car loans growth. ROSNO continues developing its program "One Call — One Visit" (MOD Euroservice), and such programs as AGO Million and European Service (OMTPL). Besides, in the 1st quarter of 2007, the company actively promoted such products as NS-Million and DMS-Million complementary to OMTPL.

Voluntary medical insurance represents one-third of the aggregate insurance premium collected by ROSNO Group. In the 1st quarter of 2007, the insurance premium collected from this type of insurance grew by 31.6% vs. the same period of 2006. Major share of the premium collected from voluntary medical insurance pertains to ROSNO (87% of collected premium) and Medexpress.

ROSNO pays special attention to improving the quality of services rendered to clients insured under the VMI programs, as well as to optimizing loss settlement costs. The work performed in customer service quality resulted in prolongation of the majority of contracts concluded in 2006.

The property insurance premium collected by ROSNO in the 1st quarter of 2007 was 17.2% more than in the same period of the previous year. This business line includes insurance of real estate property, construction and assembly works, as well as transport insurance, which, in its turn, includes insurance of water, air and railway transport, cargo insurance and carrier liability insurance.

The Group has been actively improving the quality of underwriting, which is based on selective approach and individual risk management.

The Q1’2007 growth was mainly driven by personal property insurance, mortgage insurance, and pledged and leased property insurance.
Investment policy

In the 1st quarter of 2007, ROSNO’s investment policy remained moderately conservative. The company’s investment strategy implies conservative approach with focus on yield and liquidity. Investments made by ROSNO are subject to various types of risk, including market risk, credit risk and currency risk. Pursuant to regulatory requirements, the range of assets that can be accepted as insurance reserves is limited to government debt instruments, shares, real estate, bank instruments, cash and some other instruments.

Further to observing regulatory requirements to the structure of investment portfolio, ROSNO has introduced its own internal risk management procedures to ensure that the company keeps investment portfolio risks at acceptable level.

ROSNO Group provides life insurance via its subsidiary Allianz ROSNO Life. The insurance premium collected in the 1st quarter of 2007 equalled $2.7 mln, representing an increase by 75%, as compared to the same period of the previous year. The overwhelming majority of sales are made in the retail sector. The Company’s negative financial result is determined by its active investing into regional expansion, development of retail business and bank insurance.

As of 31 March 2007, value of assets managed by MC Allianz ROSNO Asset Management equalled $ 485.9 mln, as compared to $ 467.1 mln as of 31 December 2006. Open and interval share investment funds joined the group of main drivers of the managed assets’ growing value: net asset growth in such funds amounted to 13.7%.

In the 1st quarter of 2007, IC ROSNO-MS focused at expansion in the regions of the Russian Federation by means of participating in tenders, acquiring insurance market segments and intensively cooperating with regional insurers — the company’s potential business partners.

IC ROSNO Ukraine continues active expansion in the Ukrainian insurance market. In the 1st quarter of 2007, IC ROSNO Ukraine collected $4.8 mln of insurance premium, which exceeds the premium collected in the 1st quarter of 2006 more than sixfold. The main drivers of premium growth are automobile insurance products actively sold by car dealerships and commercial banks. The share of motor vehicle insurance in the premium collected by IC ROSNO Ukraine in the 1st quarter of 2007 equalled 70.3%.