AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Sveriges Ångfartygs Assurans Förening (The Swedish Club) (TSC or the Club) (Sweden). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect TSC’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
TSC’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The Club’s free reserves increased by 9.1% during 2019 and have grown at an annual compound rate of 4.9% between 2015 and 2019. TSC maintains a good liquidity profile, with liquid assets representing 173% of net technical provisions at year-end 2019.
Historical performance has been moderately volatile, with earnings varying from a profit of USD 18.5 million (2019) to a loss of USD 8.3 million (2018) over the 2015-2019 period. In 2019, the Club reported a technical loss of USD 7.6 million with a combined ratio of 106.4%. The negative technical performance was driven by a deterioration in the protection and indemnity (P&I) line of business, while its marine line of business evolved positively compared with the previous year. Technical losses were more than offset by non-technical profits of EUR 32.2 million; the Club reported substantial unrealised investment gains as a result of the upturn in equity markets during 2019. AM Best expects TSC to report technical losses in 2020, with a material impact from P&I pool claims. Technical losses are expected to be partly offset by positive investment earnings. COVID-19 related claims had a relatively small effect on the club’s technical performance. In future years, AM Best expects the company to produce a return-on-equity in the single-digit levels.
TSC maintains a well-diversified portfolio within the marine insurance market, offering hull and machinery and P&I types of cover, and it benefits from membership in the International Group of P&I Clubs. Gross written premiums increased by 15% in 2019, following a long period of continued negative pressure on rates between 2014 and 2018. TSC is well-positioned to benefit from rate improvements following the withdrawal of capacity from poorly performing marine insurance segments.
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jose.berenguer@ambest.com
