A.M. Best Co. has affirmed the financial strength rating of A (Excellent) for Co-operators General Insurance Co. In addition, the ratings agency has affirmed the financial strength rating of A- (Excellent) for three insurance subsidiaries of Co-operators General: Sovereign General Insurance Co., L’Union Canadienne Compagnie D’Assurance, and COSECO Insurance Co.

According to A.M. Best, the rating reflects the company’s position as one of the five largest property and casualty operations in Canada, along with its good capital position, sound underwriting leverage, conservative reserve practices, large asset base, diversified distribution network and well recognized brand name.

The ratings agency notes that Co-operators General’s strong market presence has been achieved through broad product offerings as well as the ability to distribute products through approximately 500 exclusive agents and more than 600 outlets across Canada.

A.M. Best also notes that the insurer’s favorable capital position has been strengthened predominantly through positive earnings as investment income generated from a large asset base has consistently exceeded underwriting losses. It says Co-operators General maintains a solid underwriting leverage and its reserve methodology continues to be conservative, resulting in favorable loss development.

Partially offsetting these rating strengths are the extremely competitive conditions in the Canadian property and casualty marketplace which have negatively impacted Co-operators General’s underwriting performance in recent years. Frequency and severity of losses compounded by inadequate rates have led to significant underwriting losses. As a result, A.M. Best is assigning a negative outlook as recent deterioration in financial results is expected to continue through 2001 and as such, the company will remain dependent on investment income and large capital gains to sustain profitability.

A.M. Best notes given the competitive market conditions, Co-operators General may be challenged to significantly improve results in 2002. Nevertheless, operational efficiencies due to restructuring and improved use of technology should help control expenses in the long-term. Also, the ratings agency says Co-operators General has excellent potential for additional growth by cross selling through fellow group companies and cooperative members.

The ratings for the three subsidiaries, Sovereign General Insurance Co., L’Union Canadienne Compagnie D’Assurance and COSECO Insurance Co., reflect their strategic distribution role. Sovereign and L’Union serve as Co-operators General’s primary vehicles for distribution through independent brokers while COSECO distributes through employer and association groups as well as providing direct response marketing to the general public.

The rating difference is attributed to mixed operating results in the subsidiaries, marginal levels of capitalization and continued competitive pressures in the Canadian marketplace, which will further challenge profitability.