Market Overview

A.M. Best Assigns Credit Ratings to Dunav Re Company a.d.o. Belgrade


A.M. Best has assigned a Financial Strength Rating of B (Fair)
and a Long-Term Issuer Credit Rating of "bb+" to Dunav Re Company
a.d.o. Belgrade
(Dunav Re) (Serbia), a subsidiary of Dunav Insurance
Company j.s.c. Belgrade. (Dunav), a multi-line insurer operating in
Serbia. The outlook assigned to these Credit Ratings (ratings) is stable.

The ratings reflect Dunav Re's balance sheet strength, which A.M. Best
categorises as strong, as well as its adequate operating performance,
limited business profile and appropriate enterprise risk management.
Dunav Re's credit profile is negatively affected by the financial
strength of its parent company.

Since its incorporation in 1977, Dunav Re has developed its profile as a
reinsurer for its parent company, and increasingly for third party
cedants. Dunav Re's risk-adjusted capitalisation is assessed at the
strongest level, as measured by Best's Capital Adequacy Ratio, and is
expected to remain at this level, with internal capital generation
supporting the company's moderate growth plans. Offsetting factors in
the balance sheet strength assessment include Dunav Re's asset
concentration towards Serbian government bonds, the small size of the
company's capital base, and its high dependence on reinsurance. This
latter factor is mitigated partly by the good credit quality of Dunav
Re's retrocession panel.

Dunav Re has a track record of improving, albeit volatile, underwriting
profitability. In 2017, the company reported a combined ratio of 69%,
significantly lower than its five-year average combined ratio
(2013-2017) of 100.5%, with the longer-term average combined ratio
negatively impacted by catastrophe losses in 2013 and 2014. The
company's profit before tax was RSD 162 million in 2017, down from RSD
208 million in the prior year, as exchange losses impaired the company's
investment returns. Prospectively, A.M. Best expects Dunav Re to achieve
good but highly volatile underwriting results, and to report return on
equity of approximately 10%, in line with 2017.

Dunav Re generates its business primarily in Serbia, with Dunav being
its main cedant. The company is also active in the former Yugoslav
region and to a minor extent, in central Europe. Dunav Re's profile is
limited in terms of business volumes, with potential increasing
competition from international players over the longer term, although
the reinsurer currently has a dominant position in its core market of

This press release relates to Credit Ratings that have been published
on A.M. Best's website. For all rating information relating to the
release and pertinent disclosures, including details of the office
responsible for issuing each of the individual ratings referenced in
this release, please see A.M. Best's
Rating Activity
web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view
Best's Credit Ratings
. For information on the proper media
use of Best's Credit Ratings and A.M. Best press releases, please view
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