Best Upgrades SGI CANADA and Subsidiaries to ‘A-’

A.M. Best Co. has upgraded the financial strength rating (FSR) to ‘A-” (Excellent) from’ B++’ (Good) and issuer credit rating (ICR) to “a-” from “bbb+” of SGI CANADA Insurance Services Limited (SCISL).

Best also upgraded the FSR to ‘A-’ (Excellent) from ‘B++’ (Good) and the ICR to “a-” from “bbb” of SCISL’s wholly owned subsidiary, Coachman Insurance Company, and affirmed the FSR of ‘A-’ (Excellent) and ICR of “a-” of SCISL’s operating parent, SGI CANADA. All of the companies are members of the SGI CANADA Group. The outlook on all of the ratings remains stable.

In addition Best affirmed the FSR of ‘B++’ (Good) and ICR of “bbb” of The Insurance Company of Prince Edward Island (ICPEI), a majority owned subsidiary of SCISL; however, Best also revised the outlook on ICPEI’s ratings to negative from stable.

“The ratings of the SGI CANADA Group are reflective of the group’s excellent risk-adjusted capitalization and sound balance sheet liquidity, consistently profitable operating performance, overall geographic and product line diversification as well as the benefits its derives from strong centralized management and consolidated support functions such as financial reporting, reinsurance procurement and investment management,” best explained. “In addition, SGI CANADA maintains significant market share dominance in its home province of Saskatchewan.”

However, Best noted that the group faces challenges “from expansion into new territories where underwriting results have been below expectations,” which should be taken into account as offsetting factors. Best also observed that “market conditions remain generally soft, competition for market share is strong, legal challenges have been made to minor injury soft tissue caps and deductibles on auto insurance in several provinces and the group has been adversely impacted by more frequent and severe weather related events.”

The rating for ICPEI is a reflection of its “adequate risk-adjusted capitalization, historically strong operating performance and its leadership position among the top five P&C insurance companies in Prince Edward Island based on 2008 direct premium written,” said Best “The negative outlook is reflective of weakening capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), and a declining earnings trend.

“BCAR has weakened from strong premium risk growth which has not been supported by growth in shareholders’ equity over the last two years. This is primarily due to severe storm losses and unprofitable growth in New Brunswick and Nova Scotia. These concerns are partially mitigated by the company’s knowledgeable management team and the implicit and explicit financial support is receives from its stronger parent.”

Source: A.M. Best – www.ambest.com