AM Best affirms credit ratings of The Swedish Club

AMSTERDAM: AM Best Company has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Sveriges Ångfartygs Assurans Förening (The Swedish Club). The outlook of these Credit Ratings is stable.

The ratings reflect TSC’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

TSC’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The Club’s free reserves decreased by 4% during 2018, after growing at an annual compound rate of approximately 7% during the 2013-2017 period. TSC maintains a good liquidity profile, with liquid assets representing 190% of net technical provisions at year-end 2018.

Historical performance has been moderately volatile, with earnings varying from a loss of USD 8.3 million (2018) to a profit of USD 17.7 million (2017) over the 2014-2018 period. In 2018, the Club reported a technical loss of USD 3.7 million, after declining on giving premium discounts of USD 4.4 million. Positive performance in the protection and indemnity (P&I) line of business was offset by the poor performance in the marine line of business, driven by soft market conditions. In addition, the Club reported significant unrealised investment losses, as a result of the decline in equity markets during the last quarter of 2018.

AM Best expects TSC to report a positive return on equity (ROE) in the low double digits in 2019, driven by investment earnings, partly offset by a negative technical result. In prospective years, the company is expected to produce single-digit ROEs.

TSC maintains a well-diversified portfolio within the marine insurance market, offering hull and machinery and P&I types of cover, and it benefits from membership in the International Group of P&I Clubs. Premiums declined between 2014 and 2018 due to continued negative pressure on premium rates. However, TSC is well-positioned to benefit from rate improvements following the withdrawal of capacity from poorly performing marine insurance segments.

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