S&P Raises Co-Operators General Ratings

Standard & Poor’s Ratings Services today announced that it has raised its long-term counterparty credit and financial strength ratings on Guelph, Ont.-based Co-operators General Insurance Co. (CGIC) to “BBB” from “BBB-“.

S&P also raised its long-term Canadian national scale preferred stock rating on the company to “P-3” from “P-3 (Low)” and its long-term global scale preferred stock rating to “BB” from ‘BB-“. All the ratings carry a positive outlook.

“The insurer financial strength rating on CGIC reflects its position as one of Canada’s larger property and casualty (P/C) insurers; its strong ties to the co-operative/credit union system; and its strong capitalization, asset quality, and liquidity,” stated S&P credit analyst Donald Chu.

S&P noted: “CGIC’s much improved operating performance is attributed to the general improvement within the sector, and to internal changes brought about by a new CEO and executive team that took over in 2001. The company’s customer relationship management and multi-product strategy seems to be gaining traction, as client satisfaction is at an all time high and customer retention remains stable.

“CGIC is viewed as a core subsidiary of The Co-operators Group Ltd. The challenges facing the company include the cyclical nature of this sector’s operating performance, a very competitive business environment, the commodity-like nature of CGIC’s products, and the consolidation occurring in the insurance and financial services industry.”

The rating agency also indicated that “as a stock company whose ownership is primarily from within the co-operative sector, CGIC does not have full access to the equity capital markets. CGIC is not under pressure, however, to declare any dividends to its stakeholders because they are primarily from within the co-operative sector, and thus internally generated cash can be used to fund growth and strategic initiatives.”

S&P affirmed that the “positive outlook on CGIC reflects the company’s strong management team and Standard & Poor’s expects the company will continue to experience a fundamental improvement in its operating performance and business franchise.”