|[April 09, 2014]
A.M. Best Affirms Ratings of Economical Mutual Insurance Company and Waterloo Insurance Company
OLDWICK, N.J. --(Business Wire)--
A.M. Best Co. has affirmed the financial strength rating of A-
(Excellent) and issuer credit ratings of "a-" of Economical
Mutual Insurance Company (EMIC) and its wholly owned subsidiary, Waterloo
Insurance Company (WIC). Both companies are domiciled in Waterloo,
Ontario, Canada. The outlook for the ratings is stable.
The ratings reflect the consolidated results of EMIC and its
subsidiaries, collectively known as Economical Insurance, focused
marketing and branding strategies, disciplined underwriting philosophy
and pricing segmentation that have engendered Economical Insurance's
solid risk-adjusted capitalization, historically positive operating
performance, diversified product offerings and established Canadian
market presence nationally, but most notably in Ontario, British
Columbia and Alberta. These efforts have produced break-even
underwriting results in a year that the company and the industry
suffered the greatest insured losses on record.
Partially offsetting these positive rating factors are the group's
somewhat elevated expense ratios, susceptibility to weather-related
losses in its geographic footprint, recently fluctuating underwriting
performance, an competitive market conditions (as well as legislative
in Ontario) throughout its underwriting territories combined with lower
investment yields -- a product of current financial market conditions.
While A.M. Best does not expect to upgrade or place a positive outlook
on the ratings of EMIC or its subsidiaries in the near- to mid-term,
such actions would ensue if the group continues to improve the
profitability of its core book of business, further expands its surplus
in the same consistent manner as it has in recent years, or have
distinct positive changes occur within their market profile. Similarly,
A.M. Best does not expect to downgrade (or place a negative outlook on)
the same ratings in the near- to mid-term; however, such actions would
ensue if the group were to incur material losses in its capitalization
or experience a severe reduction in the profitability of its core book
of business. Additionally, an inability to contain the elevated expense
ratio with the current set of preventative measures that have been
recently put in place also could drive negative rating pressure, along
with severe catastrophic losses that are beyond expectations or
substantial adverse reserve development.
The methodology used in determining these ratings is Best's Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best's rating process and contains the different rating criteria
employed in the rating process. Best's Credit Rating Methodology can be
found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world's oldest and most authoritative
insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS
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