Canadian Underwriter

Co-operators downgraded by A.M. Best

September 16, 2002   by Canadian Underwriter

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Guelph-based The Co-operators General Insurance Company has lost its “excellent” rating from A.M. Best. The rating agency has downgraded the insurer from A- (excellent) to B++ (very good) in terms of financial strength, and downgraded its subsidiaries to B+ (very good). The company’s life operation to A- (excellent) from A (excellent), although this is based largely to issues in the p&c units, with the company posting strong results in its life, health and group businesses.
An initial rating of B+ (very good) has been given to the company’s Dublin, Ireland-based reinsurance operation, Co-operators of Canada Reinsurance International Limited. The outlook for these ratings has been changed, from negative to stable.
The company has struggled with poor underwriting results in successive quarters, causing the rating agency to comment that “its level of capitalization has fallen below A.M. Best’s expectations for an Excellent-rated company”. The company’s rising claims costs, which have outpaced premium increases, are noted, particularly in the troubled Ontario auto market.
“Co-operators General’s prospects for improved underwriting performance in the near term will be challenged by continuing loss cost inflation, despite improved pricing in the personal auto market,” says A.M. Best. However, credit is given to management for its focus on turning around its underwriting results through premium increases, by exiting unprofitable lines and offering more diverse products.
For the subsidiaries, namely Sovereign General in Calgary, L’Union Canadienne in Quebec and COSECO in Ontario, A.M. Best says, “the companies will be challenged to generate consistently favorable underwriting results to raise surplus level and support their premium growth”.