AMSTERDAM–(BUSINESS WIRE)–AM Best confirmed the financial strength rating of B++ (good) and the long-term issuer credit rating of “bbb+” (good) of Gar-Bo Försäkring AB (Gar-Bo) (Sweden). The outlook for 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 operational performance, limited business profile and appropriate management of business risks.
The balance sheet strength assessment is supported by Gar-Bo’s risk-adjusted capitalization, which, as measured by Best’s capital adequacy ratio (BCAR), is rated very strong. AM Best expects the company’s risk-adjusted capitalization to be maintained at or above a high level over the medium term, supported by strong earnings generation, which should adequately support the company’s growth forecast. .
Gar-Bo’s balance sheet strength assessment also benefits from a good liquidity profile and prudent reservation practices. A partially offset factor is the company’s moderate reliance on reinsurance, although the associated risk is somewhat mitigated by the use of a well-diversified panel of good credit quality reinsurance counterparties. In addition, the company’s relatively high allocations to unrated equities and bonds expose it to high investment risk, which increases the potential for volatility in its risk-adjusted capitalization.
Gar-Bo has a track record of strong operating performance, evidenced by a five-year weighted average return on equity of 22% (2017-2021), as calculated by AM Best, with balanced contributions from underwriting income and investment. In 2021, the company posted a combined ratio of 88% (2020: 82%), supported by strong results in its traditional and identified growth markets.
Gar-Bo is a niche insurer in the Nordic market underwriting long-term and construction-related surety products, primarily in Sweden, with expansion efforts in Denmark and Norway. Gross written premium increased to SEK 395 million (EUR 43.7 million) in 2021 from SEK 317 million (EUR 38.8 million) the previous year. In AM Best’s view, the specialized construction services the company provides, largely to mid-market construction and building clients, provide a competitive advantage in its home market. Partially offsetting factors include increased regulatory risk due to the company’s product offerings as well as its geographic focus in Sweden.
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