LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a” of LocalTapiola General Mutual Insurance Company (LocalTapiola) (Finland). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect LocalTapiola’s strong risk-adjusted capitalisation, excellent business profile and generally good operating performance. An offsetting factor to LocalTapiola’s rating is its limited financial flexibility as a mutual insurer.
LocalTapiola’s risk-adjusted capitalisation is expected to remain strong, supported by substantial claims equalisation reserves. Although LocalTapiola does not directly own its affiliated regional mutual companies (together “the group”), it owns guarantee capital, benefits from joint liability contracts and has significant cooperation with each of them. Accordingly, A.M. Best factors the regional mutual companies into its assessment of capitalisation. In 2016, the group is expected to have written EUR 1.2 billion of gross written premiums against capital of EUR 2.5 billion, which A.M. Best considers to be relatively low underwriting leverage. LocalTapiola itself holds almost two-thirds of the group’s capital, yet writes less than half of its total gross written premiums.
Since the creation of LocalTapiola from the merger of Tapiola General Mutual and LocalInsurance Mutual in December 2012, there has been a series of internal mergers and business transfers, with a substantial proportion of LocalTapiola’s voluntary non-life insurance portfolio transferred to the group’s 20 regional mutual companies in two tranches, at the end of 2013 and in mid-2015. In addition to these significant reductions in LocalTapiola’s premium income, the technical interest rate used for setting the pension-like reserves for motor liability and occupational accident claims was reduced in both 2014 and 2015, increasing the reserves by EUR 62 million and EUR 51 million at the respective year-ends. However, the resultant modest underwriting deficits in 2014 and 2015 were offset by strong investment returns. Over the medium term, A.M. Best is expecting the company’s combined ratio to improve to less than 100%, representing an increased focus on underwriting profitability. Future growth in gross written premiums is likely to be supported by the retention of earnings.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
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