Best Affirms AG Sovag ‘B++’ Rating

May 28, 2004

A.M. Best Co. announced that it has affirmed the financial strength rating of” B++” (Very Good) of Germany’s Schwarzmeer und Ostsee Versicherungs- (Sovag) ). The outlook remains stable.

“The rating reflects Sovag’s consistent and selective underwriting, resulting in a relatively stable performance with an expected combined ratio of approximately 98 percent in 2004 (compared to 97.7 percent in 2003),” said Best. “The recovery of capital markets has stabilised investment returns, leading A.M. Best to forecast an excellent return on premiums between 12 percent to 15 percent for 2004. Sovag’s risk-adjusted capitalisation is supportive of current business levels, and A.M. Best expects Sovag to maintain it through earnings retention and gradual building up of its equalisation reserve.”

The report noted that “Sovag specialises in insuring risks related to Russia and the Confederation of Independent States (CIS) and continues to capitalise on business opportunities such as increased personal accident insurance or marine and transport reinsurance in 2003.”

Perhaps as a consequence, Best noted that “an offsetting factor is the difficult business and regulatory environment in some of the countries where Sovag writes risks, which could ultimately have a negative effect on its market profile. However, A.M. Best believes that the Russian ownership is not an inhibiting factor, as assets are sufficiently protected to meet policyholder claims.”

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