AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb+” (Good) of Gar-Bo Försäkring AB (Gar-Bo) (Sweden). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Gar-Bo’s balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.

The balance sheet strength assessment is underpinned by Gar-Bo’s risk-adjusted capitalisation, which AM Best assesses as very strong, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects the company’s risk-adjusted capitalisation to be maintained at least at the very strong level over the medium term, underpinned by strong earnings generation, which should adequately support the company’s growth forecasts.

Gar-Bo’s balance sheet strength assessment also benefits from a good liquidity profile and prudent reserving practices. A partly offsetting factor is the company’s moderate reinsurance dependence, although the associated risk is mitigated by the use of a well-diversified panel of reinsurance counterparties of good credit quality. Additionally, the company’s relatively high allocations to equities and unrated bonds exposes it to elevated investment risk, which increases the potential for volatility in its risk-adjusted capitalisation.

Gar-Bo has a track record of strong operating performance, as evidenced by a five-year weighted average return-on-equity ratio of 16.8% (2019-2023), as calculated by AM Best. In 2023, the company reported a healthy profit before taxes of SEK 45 million (USD 4.5 million), notwithstanding a deteriorated underwriting profitability, as evidenced by a combined ratio of 105.2% (2022: 86.6%), driven by the increase in claims on the completion and latent defect businesses.

Gar-Bo is a niche insurer in the Nordic market that underwrites construction-related, long-duration surety products, primarily in Sweden, with expansion efforts in Denmark and Norway. Gross written premium slightly decreased to SEK 426 million in 2023 from SEK 458 million in the prior year, as a result of a slowdown in the construction business. In AM Best’s view, the specialist construction services that the company provides, largely to mid-market construction and building clients, affords a competitive advantage in Gar-Bo’s domestic market. Partly offsetting factors include a heightened regulatory risk due to the company’s product offerings and its geographic concentration in Sweden.

This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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