S&P:Co-operators General Rtgs Cut, Off Watch;Otlk Neg.Business Editors TORONTO--(BUSINESS WIRE)--Nov. 5, 2002 Standard & Poor's Ratings Services Ratings Service A company, such as Moody's or Standard & Poor's, that rates various debt and preferred stock issues for safety of payment of principal, interest, or dividends. today said it lowered the ratings on property and casualty insurer Co-operators General Insurance Co. (CGIC CGIC Clinical Global Impression of Change CGIC Credit Guarantee Insurance Corporation (South Africa) CGIC Co-operators General Insurance Company CGIC Capital Guaranty Insurance Company CGIC Canadian Geoscience Information Center ), including the long-term counterparty credit and financial strength ratings, which were lowered to triple-'B'-minus from triple-'B'. At the same time, Standard & Poor's removed the ratings from CreditWatch, where they were placed on Oct. 3, 2002. The outlook is negative. The insurer financial strength rating on Guelph, Ont.-based CGIC reflects its strength as one of Canada's larger property and casualty (P&C) insurers, its satisfactory capitalization, strong asset quality, and liquidity. CGIC is viewed as a core subsidiary of The Co-operators Group Ltd. The ratings on CGIC are modestly enhanced by the diversity in earnings generated by the sister company, Co-operators Life Insurance Co. (Co-operators Life; unrated). "The company's financial strength rating and preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. rating reflect the very competitive business environment and the commodity-like nature of CGIC's products," said Standard & Poor's credit analyst Donald Chu. "In addition, the future consolidation that is expected to occur within the insurance and financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. industry, and the low barriers to entry for the P&C market will place continued pressure on CGIC's asset growth and margins," Mr. Chu added. CGIC is the third-largest P&C insurance company in Canada, with a market share position of about 6% based on written premiums during 2001. The principal business of the company is to provide automobile, home, farm, and commercial insurance to individuals and small and midsize commercial clients. CGIC showed a small operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. for the first half of 2002; however, Standard & Poor's does not expect CGIC to achieve the level of profitability in fiscal 2002 that would be required to maintain the triple-'B' financial strength rating, due to the continued deterioration seen in the claims expense environment in Atlantic Canada, Ontario, and Alberta. The negative outlook reflects the challenges facing CGIC in achieving a reasonable growth and earnings target, given the intensely competitive environment and negative trends seen within the operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: of the P&C insurance sector. Continued weakness in the global equity market and the low interest rate environment will continue to put further downward pressure on investment returns, which will compound the difficulties currently being experienced on the underwriting side. The ratings on the company could be lowered again if it does not maintain its Minimum Capital Test (MCT See Microsoft certification. ) ratio at or above 150%, achieve a preferred dividend coverage ratio Preferred Dividend Coverage Ratio A coverage ratio that measures a company's ability to pay off its required preferred dividend payments. A healthy company will have a high coverage ratio, indicating that it has little difficulty in paying off its preferred dividend requirements. of at least 2.0 times, and a combined ratio of 110% or better for 2003. Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Fixed Income in the left navigation bar A set of buttons or graphic images typically in a row or column used as a central point that link you to major topic sections on a Web site. If the navigation bar is a single graphic image with multiple selections, it is known as an imagemap. See imagemap. , select Credit Ratings Actions. ANALYTICAL E-MAIL ADDRESSES See Internet address. e-mail address - electronic mail address : donald_chu@standardandpoors.com kevin_maher@standardandpoors.com canadian_ratings@standardandpoors.com Copyright 2002, Standard & Poor's Ratings Services |
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