LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb+” of Tryggingamidstodin hf. (TM) (Iceland). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect TM’s balance sheet strength, which A.M. Best categorises as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
TM’s balance sheet strength is underpinned by risk-adjusted capitalisation that A.M. Best expects to be maintained at the very strong level, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by the company’s good internal capital generation and flexible dividend policy. The balance sheet strength assessment also factors in the company’s good financial flexibility, demonstrated by a subordinated debt issue of ISK 2,000 million issued in 2015, and comprehensive reinsurance protection.
Earnings over the medium term are expected to remain adequate, albeit dependent on investment income. TM’s investment return is subject to potential volatility as a result of its exposure to the financial system risk of Iceland. The company also has a relatively high risk investment allocation strategy with assets that primarily consist of listed and unlisted equities, and fixed-income securities in Iceland. In 2017, the company reported a return on equity of 24%, which was driven largely by strong investment income. Prospective underwriting performance is likely to be in line with the company’s five-year average weighted combined ratio of 99% (2013-2017).
TM benefits from a good market position within Iceland’s insurance market, as well as from its strong foothold and expertise in the local marine sector. However, the company’s business profile is somewhat constrained by its geographic concentration to Iceland’s relatively small insurance market.
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