OREANDA-NEWS. August 21, 2007. OJSC ROSNO publishes ROSNO Group’s consolidated financial performance results for the first six months of the year 2007 under IFRS.

Major financial performance results of ROSNO Group

The aggregate insurance premium collected by ROSNO Group in the first six months of 2007 equalled $578.5 mln, representing an increase by 41.8% against the same period of the previous year. ROSNO’s insurance market share (excluding the schemes) for the first six months of 2007 has equalled7.9%, as compared to 6.7% for the first six months of 2006.

The results achieved by the Group during the first six months of 2007 reflect its strategy aimed at diversifying and more stable insurance portfolio and growing the share of regions and personal insurance in the total premium. In the first six months of 2007, the share of regional sales in the Group’s portfolio increased to 35.0% vs. 32.5% in the same period in 2006. In the first six months of 2007, the share of retail insurance premium increased to 33.6% against 28.1% in the first six months of 2006.

ROSNO’s strategic focus on expansion in the retail insurance sector and in the regions, combined with continuing investments in affiliates, has led to the planned decrease in profitability. As a result, ROSNO’s consolidated net profit in the first six months of 2007 equalled $ 1.5 mln.

The major reason for the decrease in profitability is the expected growth of the insurance portfolio’s loss ratio. In the first six months of 2007, the aggregate loss ratio (ratio of actual losses to the insurance premium earned) grew from 53.5% to 61.9%, as compared to the previous year. The growth of aggregate loss ratio can be attributed to ROSNO’s active expansion in the car insurance sector, especially in the regions, where loss ratio is higher than in other insurance segments, and also higher than the Moscow average. The Company has developed and implemented the measures aimed at loss ratio control. Such measures caused loss ratio to decrease by 0.4 percentage points vs. Q1’2007.
Segmentation

In the first six months of 2007, the share of IC ROSNO in the aggregate premium amounted to 89.3% (vs. 94.2% in the same period of 2006 and 90.5% in the Q1’2007). The growing share of subsidiaries can be attributed to the increase in the premium collected by Allianz ROSNO Life and ROSNO Ukraine. This represents a part of the company’s strategy aimed to diversify the insurance portfolio and enter new, potentially attractive markets.

In the first six months of 2007, vehicle insurance has been one of the major drivers of growth in collected premium. During that period, the share of vehicle insurance (including OMTPL) in the Group’s aggregate insurance premium grew to 37.7% against 31.4% in the same period of 2006, thus demonstrating a 70% growth. The growing share of vehicle insurance reflects the company’s strategy of insurance portfolio diversification and increase in the share of retail insurance sector in the total premium collected.

The work performed by the Group with regards to service quality under the voluntary medical insurance programs (VMI) resulted in prolongation of the majority of contracts concluded in 2006, and conclusion of a number of new large-scale contracts. As compared to the first six months of 2006, VMI insurance premiums have grown by 26.0%.

The property insurance premium collected in the first six months of 2007 exceeded the same collected in the first six months of 2006 by 25.1%. This business line includes insurance of real estate, 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.
Investment policy

In the first six months 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 the regulatory requirements, the range of assets that can be used to cover insurance reserves is limited to government debt instruments, shares, real estate, bank instruments, cash and some other instruments.

In the first half of 2007, certain amendments to the regulations determining the insurers’ asset structure were introduced. For example, the changes included the revised RF Ministry of Finance Order No.100N "On Approval of the Rules for Allocation of Insurance Reserves by the Insurers" and the newly adopted RF Ministry of Finance Order No. 149N establishing requirements to the assets accepted to cover the insurer’s equity. The said legal changes affected ROSNO’s asset structure and its investment policy.

Subsidiaries.

ROSNO Group provides life insurance via its subsidiary Allianz ROSNO Life. The life insurance premium collected by ROSNO Group in the first six months of 2007 equalled $6.4 mln, representing an increase by 53.4% against the same period of 2006. The overwhelming majority of sales are made in the retail sector. The Company’s negative financial result is determined by its active investment into regional expansion and development of retail business. From 30 June 2006 to 30 June 2007, the quantity of the company’s sales centres doubled from 20 to 40.

As of 30 June 2007, the assets managed by the AMC Allianz ROSNO Asset Management totaled 446.5 mln. USD. In the first half of 2007, two new share investment funds were registered: Allianz ROSNO-Shares of Raw-Material Producers and Allianz ROSNO-Shares of Non-Raw-Material Companies. This has opened new investment opportunities for the Group’s clients.

In the first six months 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. In the first six months of 2007, IC ROSNO-MS acquired the insurance company Novosibirsk-Medicine, rendering OMI services to over 900 thousand people and also providing voluntary medical insurance.

IC ROSNO Ukraine continues active expansion at the Ukrainian insurance market. In the first six months of 2007, this company collected $9.6 mln. of insurance premium, which exceeds the premium collected in the same period of 2006 more than 3.5 times. The main drivers of premium growth are automobile insurance products actively sold by car dealers and commercial banks. In the first six months of 2007, their aggregate share in the insurance portfolio of IC ROSNO Ukraine equalled 77.2% (as compared to 70.3% in the Q1’2007). The negative financial result can be attributed to the expected high loss ratio in car insurance, as well as to the business development expenses (including the same for expansion of the regional network). In the first half of 2007, the optimization of the processes related to control of expenses and loss settlement has enabled the Group to decrease loss ratio and the ratio of expenses to salaries against Q1’2007.
Corporate Finance

For the purpose of increasing the authorized capital of IC ROSNO, in July 2007, the Group’s main shareholder Allianz SE contributed 118.8 mln. USD. The share issue procedure and registration of the new size of authorized capital are to be completed by late September 2007.

In the first six months of 2007, the Group sold its interest in such subsidiaries as VTB-ROSNO and American Hospital Group.
For more detailed information look on http://www.rosno.com/en/about/press/news/show_one_newseng.shtml?alias=fin-perfomance-1half-2007&date=2007-08-14