A.M. Best gives SGI Canada an ‘A- (Excellent)’ rating

A.M. Best Co. has affirmed the ‘A- (Excellent)’ financial strength rating (FSR) of SGI Canada.
In addition, A.M. Best upgraded the strength ratings of SGI Canada Insurance Services Ltd. (SCISL), a subsidiary of SGI, and SCISL’s Atlantic Canada subsidiary, The Insurance Company of Prince Edward Island (ICPEI). Both received ratings of B++ (Very Good), improving from B+ (Very Good)
Additionally, A.M. Best affirmed the FSR of B- (Fair) of another SCISL subsidiary, Coachman Insurance Co. in Ontario.
“The affirmation of the FSR of SGI is reflective of its excellent stand-alone risk-adjusted capitalization, consistently profitable operating performance, dominant market presence in Saskatchewan, favorable near-term operating conditions throughout Canada and its experienced management team,” A.M. Best reported in a press release. “These rating strengths are offset in part by SGI’s concentration of risk in the province and the volatility in its earnings from subsidiary operations.
“These concerns are partially mitigated by SGI’s expansion into other provinces, by the profitable operating trends of its out-of-province subsidiaries and by a comprehensive reinsurance program to protect surplus.”
A.M. Best said its upgrades of SCISL and ICPEI “are based upon their strong liquid balance sheets, positive earnings trends and conservative nonaffiliated investment portfolios.”
But SCISL’s positive rating factors “are offset in part by its below average underwriting performance, potential earnings drag from expansion into neighboring Alberta and the greater earnings volatility from its subsidiary operations.”
Also, A.M. Best noted, “ICPEI’s positive ratings factors are offset in part by its concentration of risk in the Atlantic Maritimes; the uncertainty of the impact that regulated auto changes in 2003 will have on long-term profitability; and expansion risks into neighboring Nova Scotia and New Brunswick.
“These concerns are partially mitigated by a reinsurance program with low retentions and quality reinsurers, and potential reduction in underwriting volatility due to increased geographic diversification.”
Coachman’s FSR affirmation is “based upon its weak risk-adjusted capitalization, continued prior-year adverse reserve development, below-average operating performance, concentration of risk in the Ontario auto market and a modest downturn in the commercial property market,” A.M. Best reported.
On the plus side, the ratings agency observed, “these negative rating factors are partially offset by Coachman’s positive net income trend over the last three and a half years, its relatively low underwriting leverage, more stringent underwriting standards, increased product diversification, expense savings through centralized management functions, a sound reinsurance program and the explicit financial support it receives from SGI.”