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FOR IMMEDIATE RELEASE
OLDWICK - SEPTEMBER 12, 2014 09:25 AM (EDT)
A.M. Best has upgraded the financial strength ratings to A (Excellent) from A- (Excellent) and the issuer credit ratings to "a" from "a-" of First Canadian Insurance Corporation (FCIC) and Millennium Insurance Corporation (MIC). Both companies are wholly owned subsidiaries of Firstcan Management, Inc. (FMI), and headquartered in Sherwood Park, Alberta. The outlook for all ratings has been revised to stable from positive.
The rating upgrades reflect FCIC's leading market position in the automotive creditor business in Canada and favorable and consistent trends in top- and bottom-line operating performance. Risk-adjusted capitalization remains strong and is supported by the continued profitability of its operations, with modest offsetting dividends being paid to FMI to support the growth of an affiliated bank entity.
Partially offsetting these positive rating factors are the company's narrow product offering, focused almost exclusively on the automotive industry in Canada, and concentration of invested assets in equity securities in the Canadian financial sector. Due to FCIC's strong penetration in its niche market, the ability to continue strong premium growth will likely be limited without diversifying the company's geographic focus or product offerings.
Following the upgrade of the ratings, positive rating actions for FCIC are unlikely in the near term. Key factors that could lead to negative rating actions include deterioration in risk-adjusted capitalization, unfavorable trends in underwriting and operating performance and an adverse economic impact on the automotive industry in Canada that significantly reduces premium income.
The rating upgrades for MIC reflect its solid level of risk-adjusted capitalization and favorable operating results. Also, the ratings recognize management's highly specific underwriting expertise, discipline and established market profile as a vehicle service contract provider. Partially offsetting these positive rating factors is the company's elevated unearned premium reserve leverage due to the long duration of vehicle service contracts, which extends several years.
Following the upgrade of the ratings, positive rating actions for MIC are unlikely in the near term. Factors that may drive downward movement in the ratings or outlook include deterioration in risk-adjusted capitalization below the level required to support the ratings or underwriting performance that is not in line with A.M. Best's expectations.
The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.