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A.M. Best Affirms Ratings of Economical Mutual Insurance Company and Waterloo Insurance Company
[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

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit

Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

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