Ingosstrakh Received Lithuanian Warning
While Russia was celebrating Victory Day, the Lithuanian Insurance Supervision Commission arrested part of the assets of local Ingosstrakh affiliate – INGO Baltic. The reason for the sanctions was the shortage of the payoff funds. Ingosstrakh considers the arrest as temporary technical measure and insists that INGO Baltic works in normal regime.
Lithuanian news agency ELTA reported that on May 9 the Lithuanian Insurance Supervision Commission made a decision to arrest INGO Baltic assets in amount of 10 million Lits ($3, 7 million). The supervision agency found out that Ingosstrakh affiliate does not have enough money to payoff insurance claims.
The INGO Baltic was created in 1992. The main founder and stake holder of the company is Ingosstrakh. The Russian insurance company controls 61, 78 percent of its affiliate. The rest of the stock belongs to private Lithuanian insurance company Baltic Garant. The INGO Baltic initial capital is 7, 2 million Lits (about $2, 7 million). The regional network of the insurance company contents 56 sales offices. In 2004 INGO Baltic acquired 39, 9 million Lits ($15, 5 million).
Director General of INGO Baltic Ionas Berzhanskas said that one of the factors that worsened company’s financial situation was almost double expansion of the Lithuanian offices. The company paid 4, 68 million Lits ($1, 7) to open new regional insurance centers. However, the Moscow colleagues of Berzhanskas think that the spending for the company reorganization was justified.
Ivan Sergeev, head of the Ingosstrakh department of direct investments told Kommersant that INGO Baltic made structural reorganization in 2004. The company added seven new regional centers and increased number of employees from 171 to 426. As a result, the INGO Baltic already in 2004 doubled acquisition of the insurance premiums, and because of that increased its liability. Sergeev explained that the Insurance Supervision Commission had problem with INGO Baltic because “the company needs of more cash assets than it has right now to maintain increased business.”
“To maintain necessary level of the company’s payoff ability, the stockholders increased initial capital twofold in the last year: from 4 million Lits to 5, 6 million in April and up to 7, 2 million in December of 2004. However, because of the high growth rate that was not enough.” Sergeev says. According to his words, in the end of April on annual stockholders meeting Ingosstrakh proposed to increase initial capital by 11 million Lits. Though, this decision was blocked by another stakeholder -- Baltic Garant.
Currently, the insurance company stockholders are considering additional increase of INGO Baltic capital. The terms and amount of additional investments will be determined in the unscheduled meeting on May 31. “The situation with Baltic Garant is controllable,” thinks Sergeev. “The Commission’s decision is temporary and technical. The company continues to work in Lithuania in normal regime: all licenses are kept, the insurance policies are being issued, loses are being examined and paid off.”
Vladimir Vodo, Vilnius; Tatiana Grishina
All the Article in Russian as of May 12, 2005
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