A.M. Best Upgrades Ratings of SOLID Försäkrings AB

OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has upgraded the financial strength rating (FSR) to B+ (Good) from B (Fair) and the issuer credit rating (ICR) to “bbb-” from “bb” of SOLID Försäkrings AB (Solid) (Sweden). The outlook for both ratings is stable.

The rating action reflects Solid’s significantly improved risk-adjusted capitalisation, continued strong operating results and its good niche position in the Swedish extended warranty market. These positive factors are partly offset by a reinsurance program dominated by unrated reinsurance companies.

In A.M. Best’s view, Solid’s risk-adjusted capitalisation has significantly improved following the reduction of a high amount of intercompany loans. However, the reinsurance program relies predominately on unrated reinsurance companies and, in particular, on an unrated captive based in Switzerland into which Solid cedes more than 50% of its premiums.

A.M. Best expects Solid’s earnings before taxes to fall into the range of SEK 62 - 65 million (USD 9.99 million) in 2008, up from SEK 51 million (USD 7.92 million) in 2007, and anticipates a combined ratio between 81% and 82% for 2008 (82.9% in 2007). In line with other players, Solid benefits from a low frequency of claims in its warranty portfolio; however, this is offset by relatively high commission payments to retailers and brokers.

Overall results are expected to translate into a return on premium between 10.5% and 11.5% in 2008, up from 10.4% in 2007.

Solid’s main line of business is warranty insurance (approximately 75% of gross written premiums) in which it has built a good niche position in Sweden. Consequently, A.M. Best anticipates a continued strong premium growth by 10%, fuelled by an expansion into other lines of business, such as car warranty and travel insurance paired with a moderate premium growth outside Sweden. As a result, A.M. Best expects gross written premiums to fall into the range of SEK 1.1 - 1.2 billion (USD 172 - 187 million) in 2008.

For Best’s Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.