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FOR IMMEDIATE RELEASE
OLDWICK - MAY 22, 2015 09:09 AM (EDT)
A.M. Best has affirmed the financial strength rating (FSR) of A- (Excellent) and the issuer credit ratings (ICR) of "a-" of Co-operators General Insurance Company (Co-operators General) (Ontario) and its subsidiary, The Sovereign General Insurance Company (Sovereign) (Alberta).
In addition, A.M. Best has affirmed the FSR of A (Excellent) and the ICR of "a" of Co-operators Life Insurance Company (Co-operators Life) (Saskatchewan). The outlook for all ratings is stable.
Co-operators General, Sovereign and Co-operators Life are part of The Co-operators Group Limited (CGL) (Ontario).
The ratings of Co-operators General recognize its strong risk-adjusted capitalization, profitable operating performance, strong brand name recognition, product line and geographic diversifications, as well as the effective use of its subsidiaries and multiple channels of distribution. Partially offsetting these strengths are strong competitive market pressure, a trend of more frequent and severe losses from storms across Canada driving slight underwriting losses, as well as the uncertainty surrounding the impact of mandatory rate reductions in Ontario auto lines.
The ratings of Sovereign acknowledge its continued favorable operating performance, solid risk-adjusted capital position and its strategic position of importance to the entire organization. Partially offsetting these positive rating factors are soft commercial lines pricing and Sovereign's historically higher expense ratio. However, these concerns are mitigated by the explicit financial support and guarantee provided by Co-operators General.
Positive rating actions for the property/casualty companies, Co-operators General and Sovereign, are not likely in the near term. However, negative rating pressure could occur if an unfavorable earnings trend develops, capital erodes or if there is a lessening of the implicit or explicit support provided to either company.
The ratings for Co-operators Life reflect its continued profitability, growth in core business segments and strong capital position (both on an absolute and risk-adjusted basis). Premiums have increased in 2014 mainly due to additional distribution channels and increased group annuity sales including a pension risk transfer deal during the year. The company offers a wide variety of products to individual, group and credit union markets throughout Canada.
Partially offsetting these strengths are the continued losses in Co-operators Life's group business and the challenges it faces regarding competition from larger players in the Canadian life market. Furthermore, earnings have been constrained in recent periods by the impact of the low interest environment, which necessitated redesigns in certain products.
A.M. Best believes that positive rating actions for Co-operators Life are unlikely in the near term to medium term. Key factors that could result in negative rating actions for Co-operators Life include a significant and sustained decline in its risk-adjusted capitalization, large investment losses or operating performance that does not meet A.M. Best's expectations over a sustained period.
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 .
Key insurance criteria reports utilized:
This press release relates to rating(s) that have been published on A.M. 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 visit A.M. Best's Ratings & Criteria Center.
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.