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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - JANUARY 23, 2001 12:00 AM (EST)
A.M. Best Co. has assigned an A- (Excellent) financial strength rating to ERIKA Insurance Limited, Stockholm, Sweden.
The rating reflects ERIKA's excellent capitalization and historically profitable underwriting and operating results, supported by a prudent reserve position and adequate reinsurance through highly-rated entities. The equity position, including contingency reserves, has doubled over the past three years and capitalization measures are strong, particularly given the company's short-tail book of business. Underwriting profit has steadily increased over the same period, with an average combined ratio of 92%, and operating performance has remained strong with good financial returns. The investment philosophy is conservative, with a large portion of the portfolio's liquid assets invested in fixed income securities and cash.
The rating also acknowledges ERIKA's expertise in understanding the travel insurance industry and its ability to provide tailor-made insurance products to this market. There is a good spread of risk within the portfolio. Marketing and customer service are outstanding, with closely monitored quality performance standards for sales and claims agents. Premiums have grown to SEK 172 million from SEK 47 million in 1995, based on an increase in sales penetration and pricing. The company has taken advantage of its underwriting experience to be a price leader on travel insurance products such as personal liability, accident and health, medical expenses, baggage and transportation and travel assistance. These products are branded and created specifically for each particular tour operator reflecting a positive identification from the travel product to the insurance product. Further premium growth is expected for 2000 from a new contract with one of Scandinavia's largest charter tour operators.
In its fifth year of operations, ERIKA is a market leader for travel insurance in Scandinavia, concentrating on two major segments: leisure travel in Scandinavia and student travel worldwide. The company is part of the EF Education group, insuring participants on travel programs organized by the EF Education Group. The company is expanding on the external, non-EF Group, market through more partnerships with international tour operators.
Partially offsetting the positive rating factors are organizational challenges resulting from growth pains associated with the company's rapid success in its niche market. More time is being dedicated to structuring administrative processes and improving coordination between business units. The slow implementation of two strategic information technology projects has hindered the company's progress. Additionally, the company must maintain its competitive edge over other travel insurance providers in the Scandinavian market by continuing to increase the sales penetration on existing client portfolios and developing new and attractive product offerings to the market. A.M. Best will be monitoring the company's progress as it expands the geographical scope of business while establishing a new business area in large client business travel and expatriate insurance. The rating outlook is stable.
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.