A.M. Best Co. announced that it has affirmed the financial strength rating of “B++” (Very Good) of German insurer SCHWARZMEER UND OSTSEE Versicherungs-Aktiengesellschaft SOVAG (Sovag), with a stable outlook.
Best said the rating reflects its “expectations of an improving underwriting performance in 2005 with a combined ratio of approximately 98 percent, following unsatisfactory results in 2004.The company achieved a return on premiums of 4.2 percent and a combined ratio of 108 percent as the establishment of incurred but not reported reserves for personal accident business and an adverse development in hull negatively impacted 2004 after tax profit.
“Sovag’s excellent risk-adjusted capitalisation will further grow through retained earnings and an increasing level of equalisation provisions in 2005.”
Best explained that “Sovag writes primary insurance and reinsurance, focusing on business relating to Russia and the CIS countries, a niche in which it has established itself as a specialist insurer.”
The rating agency indicated that it “expects Sovag to compensate for the decrease in the traditional transport business (due to cancellation of specific lines, e.g., marine hull and London aviation, and softening rates) and stagnating motor business by prudently underwriting property and new lines of business such as personal accident and medical travel insurance, thus improving its risk diversification.”
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