Rating agency Standard & Poor’s has lowered the counterparty credit and financial strength ratings of Allianz Insurance Co. of Canada and Trafalgar Insurance Co. of Canada to “BBB+” from “A+”. The ratings have been taken off watch, but have been assigned a negative outlook. “The ratings on AZ Canada [Allianz and Trafalgar collectively] were lowered due to continued relatively weak (although improving) operating performance and concerns regarding the insurer’s long-term strategic importance to parent company Allianz AG,” says S&P credit analyst Michael Gross. “Although the insurer maintains a good business profile and is expected to be profitable in 2003, AZ Canada still has underwriting progress to achieve and faces operating challenges in a fragmented and competitive Canadian p&c operating environment.” While the company has a strong standalone financial profile, it has shown relatively weak operating performance, states S&P, hence the negative outlook. Continued improvement in results is needed to change the outlook to stable. S&P does expect to see improved results from the insurer for 2003, including a combined ratio of 102-105% and positive net income, in the absence of unexpected reserve charges or catastrophes. S&P also notes that the company ranks 12th in Canada based on 2002 direct written premium and maintains strong capital at 137% on S&P’s capital adequacy ratio.