A.M. Best Co. announced that it has affirmed the A- (Excellent) financial strength ratings of Tryg-Baltica Insurance, International Insurance Company A/S (‘TBI’) and Tryg-Baltica International (UK) Limited (‘TBI UK’), and has maintained a “negative outlook” it first assigned to the ratings last October.
“The rating actions reflect the restoration of the capital base and stronger consolidated risk-adjusted capital position, and prospective improvements in operating performance,” said Best. It reaffirmed that the “consolidated capital position is commensurate with the current rating level, having benefited from two capital injections in 2002. The position is forecast to further improve as a consequence of prospectively improving earnings, potentially lower reserve risk and reduced dependence on reinsurance.”
Best indicated that in its view a “new management team has enhanced underwriting disciplines and controls in addition to restructuring the portfolio with a focus on premium limits, hurdle rates and higher deductibles,” and forecast “a return to profitability on both an underwriting (combined ratio below 100%) and bottom line basis by year-end 2003.”
The rating agency explained that the continued negative outlook “reflects the lack of a track record with regard to the sustainability and success of the new strategy and portfolio restructuring, and some uncertainties surrounding reserve development, particularly with the run-off of the energy account.”
Best concluded that it expects “consolidated risk-adjusted capitalisation will be maintained at least at the 2002 year-end level as measured by A.M. Best’s risk based capital model, and that consolidated profitability will improve, benefiting from the restructuring and re-underwriting of the UK and Danish portfolios and improved market conditions.”
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