AMSTERDAM--(BUSINESS WIRE)--AM Best has assigned a Financial Strength Rating of B++ (Good) and a Long-Term Issuer Credit Rating of “bbb+” (Good) to Gar-Bo Försäkring AB (Gar-Bo) (Sweden). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect Gar-Bo’s balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
Gar-Bo’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), is categorised as very strong. AM Best expects Gar-Bo’s risk-adjusted capitalisation to be maintained at the very strong level over the medium term, supported by strong internal capital generation.
The company’s balance sheet strength also benefits from a good liquidity profile and prudent reserving practices. A partly offsetting factor is the company’s moderate reinsurance dependence, although the associated risk is mitigated somewhat by the use of a well-diversified panel of reinsurance counterparties of good credit quality. Additionally, the company’s relatively high allocations to equities and non-rated bonds expose it to elevated investment risk, which increases the potential for volatility in risk-adjusted capitalisation.
Gar-Bo has a track record of strong operating performance, as evidenced by a five-year weighted average return on equity of 25% (2016-2020), as calculated by AM Best, with good contributions from both technical and investment income. In 2020, the company reported a strong combined ratio of 82% (2019: 90%), largely reflecting benign claims development in markets where it is expanding (predominantly Denmark, but also Norway).
Gar-Bo is a niche insurer in the Nordic market that underwrites construction-related long-duration and surety products, primarily in Sweden. Gross written premiums increased to SEK 317 million (EUR: 31.3 million) in 2020 from SEK 183 million (EUR 18.0 million) in the prior year. In AM Best’s view, the specialist construction services that the company provides largely to mid-market construction and building clients affords a competitive advantage in its domestic market. A partly offsetting factor is heightened regulatory risk due to the company’s lines of business that it offers, as well as its geographic concentration in Sweden.
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