Best Affirms Tryg-Baltica Int’l. Ins. ‘A-‘Rating

April 8, 2004

A.M. Best Co. announced that it has affirmed the financial strength rating of A- (Excellent) of Denmark’s Tryg-Baltica Insurance, International Insurance Company A/S (TBI) with a negative outlook.

“The rating reflects the company’s adequate risk-adjusted capital position despite deterioration and improved performance. An offsetting factor is volatility in reserves,” Best stated.

The rating agency said it “expects TBI’s risk-adjusted capital to remain at an adequate level based on assumptions for performance in 2004 and 2005, after capital deteriorated by DKK 265.6 million (USD 44.8 million) in 2003. This deterioration was a result of retained losses from TBI’s former subsidiary, Chevanstell Ltd. (previous company name—Tryg-Baltica International [UK] Ltd.), and further reserve strengthening. Further deterioration in capital or net premium growth above expectations is likely to trigger a downgrade.”

Best also said it “believes TBI could achieve a combined ratio below 100 percent in 2004 based on current favourable underwriting conditions in the property market where TBI derived 70 percent of its gross written premiums in 2003.” It anticipates a pre-tax profit of approximately DKK 20 million (USD 3.4 million) in 2004 “as a result of improved technical results and maintenance of its investment income from its fixed-interest portfolio.” However, while this is achievable it will be a challenge for the company.

Best also note that TBI has “experienced volatility in reserves in recent years, which has culminated in further reserve strengthening in 2003. A.M. Best expects that an improvement in administrative procedures and a change in reserving methodology are likely to reduce further reserve volatility.”

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