S&P Assigns ‘A-‘ Rating to TrygVesta Group

Standard & Poor’s Ratings Services announced that it has assigned its ‘A-‘ long-term counterparty credit and insurer financial strength ratings to Denmark-based Tryg Forsikring A/S (Tryg) and Norway-based Vesta Forsikring AS (Vesta), core entities of the TrygVesta group (TVG), with a stable outlook.

S&P also assigned its ‘A-‘ long-term counterparty credit and insurer financial strength ratings to Denmark-based surety insurer Dansk Kautionforsikrings – A/S (Dansk Kaution), a member of the TrygVesta group, also with a stable outlook.

“The ratings are based on TVG’s strong competitive position in Scandinavia and the enhanced profitability and reducing risk appetite resulting from positive management action,” stated S&P credit analyst Paul Oates.

S&P noted, however, that “offsetting this is TVG’s poor operating performance from 2000-2002 and its impact on capitalization levels.”

The rating agency said the stable outlook reflects its “expectation that profits generated by TVG over the next few years will be used to restore the capital position. A combined ratio of below 100 percent is expected for 2004, reflecting the higher premium rates in both 2003 and 2004 to date, and profits of Danish krone (Dkr) 600 million (80.7 million euros -$ 96.85 million) in 2003.”

S&P also expects the group’s capital position “to improve to a strong level as dividend payments from TVG to its parent (Tryg I Danmark smba; not rated) remain low. Relative capital positions within the group will be rebalanced through dividends, transfers, and core profit generation.”

“Standard & Poor’s expects management to maintain its increased focus on risk control, implementing strict underwriting controls and low investment risk tolerance. “Should any major acquisition by TVG become likely in the future, this could lead to the ratings being reviewed,” Oates added.

Commenting on Dansk Kaution’s rating, S&P indicated that they were based on the company’s “strong capitalization and very strong operating performance. Offsetting this is the company’s competitive position, which–although strong–is currently restricted to Danish bond insurance, bringing inherent concentration to Dansk Kaution’s risk profile.”

S&P also noted that the “ratings are based on Dansk Kaution’s stand-alone characteristics.”

“The stable outlook reflects Standard & Poor’s expectation that Dansk Kaution’s strong financial profile will remain capped by the risks inherent to the small concentrated market in which the company operates,” Oates indicated.

S&P said it “expects Dansk Kaution to continue to be profitable while the Danish economic environment remains stable. Capital is expected to remain at an extremely strong level following any anticipated dividend payment to Dansk Kaution’s parent. In addition, management is expected to maintain its focus on risk control, implementing strict underwriting controls and low investment risk tolerance.”