A.M. Best Upgrades Ratings of Solid Forsakringsaktiebolag

LONDON--(BUSINESS WIRE)-- A.M. Best Europe – Rating Services Limitedhas upgraded the financial strength rating to B++ (Good) from B+ (Good) and the issuer credit rating to “bbb” from “bbb-” for SOLID Forsakringsaktiebolag (Solid) (Sweden). The outlook for both ratings remains stable.

The ratings of Solid reflects its improving risk-adjusted capitalisation, strong operating performance and good business profile as a niche extended warranty insurer.

In 2011, risk-adjusted capitalisation is expected to improve following a significant reduction in inter-group transactions. Solid has revised its reinsurance strategy and as a result, has cancelled reinsurance cover on its extended warranty/accidental damage portfolio, which was principally provided by an unrated affiliated reinsurer. Additionally, Solid’s exposure to its affiliate bank, Resurs Bank AB, is expected to reduce to around 35% of total investments in 2011 (2010: 66% of total investments). Risk-adjusted capitalisation continues to be enhanced by the safety reserve, which in accordance with Swedish insurance regulations, can only be released to cover insurance losses and is funded from the company’s cumulative retained pre-tax earnings.

Solid is expected to report an increase in technical earnings in 2011, primarily as a result of increased retention following the change in its reinsurance strategy, as well as the favourable performance on its extended warranty portfolio. As Solid continues to diversify into other lines of business, such as personal motor and personal property, the loss ratio is expected to increase from the 38.2% reported in 2010.

Solid maintains a good niche position within the Swedish extended warranty market. Net written premium (NWP) is expected to significantly increase in 2011 to around SEK 1.2 billion (2010: SEK 678.4 million) as the company increases its retention on its extended warranty/accidental damage portfolio, as well as expands its other lines of business, such as personal motor and property. In 2012, the motor portfolio is expected to account for over 10% of NWP. Following a recent ruling by the Swedish Market Court, multi-year policies are no longer permitted, and as such, Solid must now write extended warranty business on an annual basis. This may potentially affect premium volumes going forward; however, this is offset by the improved pricing and risk selection flexibility that this change offers.

Upward rating pressures may result from an improvement in Solid’s business profile outside of its niche market, as well as further increases in risk-adjusted capitalisation, principally driven by a reduction in its exposure to Resurs Bank.

Downward rating pressures may be triggered by a deterioration in Solid’s underwriting and/or overall results, as well as a deterioration in risk-adjusted capitalisation. In addition, an increased reliance on affiliated companies may have a negative impact on the ratings.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilised include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; “Understanding Universal BCAR”; and “Assessing Country Risk”. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.

A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best Company.Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2012 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.

A.M. Best Company, Inc.
Grace Panti-Amoa, +(44) 207 397 0331
Associate Financial Analyst
[email protected]
or
Rachelle Morrow, +(1) 908 439 2200, ext. 5378
Senior Manager, Public Relations
[email protected]
or
Sam Dobbyn, +(44) 207 397 0264
Associate Director
[email protected]
or
Jim Peavy, +(1) 908 439 2200, ext. 5644
Assistant Vice President, Public Relations
[email protected]

Source: A.M. Best Company, Inc.