S&P Revises Outlook Swedish Club to Positive

August 12, 2004

Standard & Poor’s Ratings Services announced that it has revised its outlook on Gothenburg-based marine mutual insurer The Swedish Club to positive from stable. S&P also affirmed its ‘BBB-‘ long-term counterparty credit and insurer financial strength ratings on the club.

“The outlook revision reflects Standard & Poor’s expectation of a sustained improvement in underwriting earnings,” said the bulletin. “The ratings are based on the club’s good capitalization, good competitive position, and strong financial flexibility (defined as the ability to source capital relative to needs).”

S&P indicated, however, that “these positive factors are partially offset by the club’s historically marginal but improving operating performance.” S&P credit analyst Rowena Potter indicated: “The positive outlook is based on Standard & Poor’s perception of a strengthening in the club’s underwriting discipline. This should lead to a sustained improvement in profitability in 2004, 2005, and into 2006, in order to support an upgrade.”

The rating agency said it expects a positive underwriting result to be recorded in 2004, and “aided by investment income should result in a further increase in free reserve levels. The combined ratio is expected to remain below 107 percent through to 2006. Solvency is expected to be maintained above the minimum level set by the club’s members during 2004 (that is, free reserves in excess of 100 percent of net claims and administration costs). Reserving will remain conservative, and further positive run-off should give increased credence to the high level of redundancy estimated to be within the reserves by the club’s internal actuary.”

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