A.M. Best Co. has upgraded the issuer credit rating (ICR) to “bb+” from “bb” and affirmed the financial strength rating (FSR) of ‘B’ (Fair) of Unifund Assurance Company, which is based in St. John’s, Canada.
Best has also affirmed the FSR of ‘A’ (Excellent) and ICRs of “a” of Royal & Sun Alliance Insurance Company of Canada (RSA Canada), Quebec Assurance Company, and Western Assurance Company, known collectively as RSA Canadian Property/Casualty Pool.
In addition Best has affirmed the FSR of ‘B+’ (Good) and ICR of “bbb-“of Toronto-based Ascentus Insurance Ltd. and the FSR of’ B’ (Fair) and ICR of “bb+” of Vancouver-based Canadian Northern Shield Insurance Company (CNS). Best noted that all of the companies are subsidiaries of Roins Financial Services Limited, the Canadian holding company of UK-based RSA Insurance Group plc. They are collectively referred to as the RSA Group of Canada.
The outlook for all of these ratings is stable.
The rating actions on the pool reflect Best’s viewpoint that “it maintains a strong risk-adjusted capitalization, solid investment income and sound reserve development,” said the report. “The pool has produced solid underwriting results, which have consistently increased equity over the last five years prior to the stockholder dividends.
“Collectively, the pool provides commercial property/casualty coverage as well as personal and specialty coverages throughout Canada. The companies in the pool maintain a presence in all of the Canadian provinces and distribute their product range through multiple distribution channels, including a large independent broker network. The ratings also reflect the pool’s strong integration with RSA through its systems and procedures and its significant contribution to RSA’s overall profit.”
Best explained that the ratings of Unifund “acknowledge its improved risk-adjusted capitalization, consistent operating performance and favorable reserve development. The ratings also reflect Unifund’s strategic role within the Johnson Corporation, a major intermediate holding company within the RSA Group of Canada.
“Historically, Unifund has been a growth vehicle for the overall Canadian organization. In prior years, Unifund’s rapid premium expansion outpaced equity growth, which resulted in elevated underwriting leverage measures and a sharp decline in overall risk-adjusted capitalization. More recently, the company’s premium levels have stabilized, equity has increased and overall risk-adjusted capitalization has improved.
“However, Unifund remains highly leveraged as net and gross underwriting leverage ratios exceed the industry composite. The company primarily is a writer of personal lines insurance for associations and groups throughout Ontario, Alberta, Newfoundland and Labrador and Nova Scotia.”
The rating actions also reflect Unifund’s “strong integration within RSA Group of Canada through its systems and procedures and its significant contribution to RSA’s overall profit.” Best added that it remains “somewhat concerned about softening market conditions, fierce competition and the long-term benefits of regulated product reforms to auto insurance industry in the core operating territories of Ontario and Alberta. As a result, the members of the RSA Group of Canada may be challenged to maintain current levels of profitability.
“The ratings of Ascentus are based on its solid level of capitalization, which supports its underwriting and investment risk. The level of the company’s premium volume has sharply declined in recent years, since all private passenger auto and personal property businesses were renewed into RSA Canada. The company now concentrates on marine business throughout Canada.
“The ratings of CNS recognize its elevated underwriting leverage, high underwriting expenses and adequate operating performance. CNS provides RSA Group of Canada improved geographic diversity, increased distribution and growth opportunities within British Columbia, where a majority of CNS’ premiums are written. CNS is fully integrated into RSA Group of Canada’s operations and continues to benefit from the implicit and explicit support it receives as a member of RSA Group of Canada.”
Source: A.M. Best
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