A.M. Best Affirms GCNA ‘A’ (Excellent) Rating, Upgrades U.S. Sub to ‘A-‘

December 20, 2002

A.M. Best Co. has affirmed the financial strength rating of A (Excellent) of The Guarantee Company of North America, based in Montreal, and has upgraded the financial strength rating to A- (Excellent) from B+ (Very Good) of its U.S. subsidiary, The Guarantee Co of North America USA (GCNA USA) of Mount Laurel, NJ. Both ratings have a “stable” outlook.

“The ratings reflect GCNA’s very strong capitalization, favorable operating performance and strong market presence in Canada’s fidelity and surety business. These positive rating factors are derived from GCNA’s disciplined underwriting philosophy and strong relationships with its broker distribution system. Also, these strengths are indicative of GCNA’s experienced management team and its focus on sound underwriting and operating practices,” said Best.

The rating agency added that “By extending its Canadian broker distribution system to new territories and adding new brokers, GCNA will continue to seek selected marketing opportunities to achieve greater geographical and product diversification.”

It noted, however, that the company’s “deteriorating operating performance in its Ontario auto business and the challenge to profitably grow its surety book of business in the U.S.” partially offset the positive factors.

The bulletin went on to explain that “since acquiring its U.S. subsidiary in 2001, GCNA has committed considerable attention and resources to fully integrate GCNA USA with its business philosophy, underwriting and claims management practices, in order to improve its operating results going forward.”

As a result Best’s rating action on GCNA USA “reflects its strategic importance to GCNA as the platform for expansion into the U.S. surety market. The U.S. operation benefits directly from both the implicit and explicit support of GCNA.”

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