AMSTERDAM–(BUSINESS WIRE)–AM Best has revised the outlook to negative from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term ICR of “bbb+” of Protector Forsikring ASA (Protector) (Norway). The outlook of the FSR remains stable.
These Credit Rating (ratings) reflect Protector’s balance sheet strength, which AM Best categorises as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The negative outlook of the Long-Term ICR reflects pressure on Protector’s balance sheet strength assessment, following a general trend of deteriorating risk-adjusted capitalisation over recent years, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s BCAR assessment deteriorated from strongest in 2017 to strong in 2018 and 2019, impacted by a reduction in capital and surplus combined with strong top-line growth. Risk-adjusted capitalisation has been further reduced by unrealised investment losses in the first quarter of 2020 and remains subject to volatility from fluctuations in financial markets. The company has a solvency-based reinsurance contract in place, which could improve risk-adjusted capitalisation if triggered. AM Best will monitor the development of the company’s risk-adjusted capitalisation closely, and a negative rating action could follow if the company is not able to maintain risk-adjusted capitalisation at a level supportive of the current balance sheet strength assessment.
Protector has a good historical earnings track record, as demonstrated by a five-year weighted average return on equity of 10% (2015-2019) (as calculated by AM Best). However, performance was weak in 2019, reflected by a reported loss of NOK 400,000 that was driven by poorly performing business written in Norway and Finland. AM Best expects underwriting performance to improve in 2020, following various remedial actions taken by the company since 2018 to address areas of underperformance.
Established in 2004, Protector benefits from its relatively strong foothold and expertise in Norway’s commercial and public insurance sector. The company has grown rapidly in recent years, as evidenced by gross written premiums increasing to NOK 5.1 billion (USD 587 million) in 2019 from NOK 1.2 billion (USD 201 million) in 2011. Expansion has been driven principally by the company entering new markets, including Sweden and Denmark, and more recently the United Kingdom and Finland. Protector’s geographical diversification has improved in line with its expansion activity.
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