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A.M. Best Upgrades Ratings of The Sovereign General Insurance Company.

OLDWICK, N.J. -- A.M. Best Co. has upgraded the financial strength rating (FSR) to A- (Excellent) from B++ (Good) and issuer credit rating (ICR) to "a-" from "bbb" of The Sovereign General Insurance Company (Sovereign) (Alberta). Concurrently, A.M. Best has affirmed the FSR of A- (Excellent) and ICR of "a-" of Co-operators General Insurance Company (Co-operators General). Sovereign is a wholly owned subsidiary of Co-operators General.

At the same time, A.M. Best has affirmed the FSR of A (Excellent) and ICR of "a" of Co-operators Life Insurance Company (Co-operators Life) (Saskatchewan).

In addition, A.M. Best has affirmed the ICR of "bbb-" and the senior debt rating of "bbb-" on CAD 150 million 5.07% senior unsecured debentures, due July 2012 of Co-operators Financial Services Limited (CFSL), an interim holding company. The outlook for all the above ratings is stable.

Additionally, A.M. Best has affirmed the FSRs of B+ (Good) and ICRs of "bbb-" of L'Union Canadienne Compagnie D'Assurances (L'Union) (Quebec) and COSECO Insurance Company (COSECO). The outlook for the ratings of L'Union has been revised to positive from stable, while the outlook for the ratings of COSECO is stable.

Together, Sovereign, Co-operators General, Co-operators Life, L'Union and COSECO comprise The Co-operators Group Limited (The Co-operators). All companies are domiciled in Ontario, unless otherwise specified.

The upgrading of the ratings of Sovereign reflects its continued favorable operating earnings trend and solid risk-adjusted capital position. In addition, the company's ratings also reflect a rating enhancement from a formal guaranty issued by Co-operators General with respect to Sovereign's liabilities.

The ratings of Co-operators General recognize its strong risk-adjusted capitalization, generally historical profitable operating performance as well as its market leadership position driven by strong brand name recognition, product line and geographic diversification and the effective use of subsidiaries and multiple channels of distribution.

Partially offsetting these strengths is the continued soft market in the commercial lines sector, strong competitive pressure in personal lines, challenging automobile markets and a trend of more frequent and severe losses from storms across Canada.

The ratings of L'Union and COSECO recognize their risk-adjusted capitalization relative to their ratings, good overall balance sheet liquidity and their strategic roles within The Co-operators. Additionally, L'Union's positive outlook reflects A.M. Best's expectation that it will continue to produce favorable operating trends, while maintaining a conservative level of risk-adjusted capitalization.

The ratings of Co-operators Lifeacknowledge its consistently positive operating earnings, strong risk-adjusted capital position and continued growth in premium within its core business segments. The company offers a wide variety of products to individual, group and credit union markets throughout Canada.

Partially offsetting these strengths are Co-operators Life's challenges to successfully penetrate the Quebec market, transition issues as it integrates the CUMIS General Insurance Company (CUMIS) acquisition and competition from larger competitors. The CUMIS acquisition should further strengthen Co-operators Life's business profile in the credit union market and help it compete against larger insurance organizations. Although full integration will not be completed until year-end 2011, a number of significant steps were completed during 2010.

The principal methodology used in determining these ratings is Best's Credit Rating Methodology -- Global Life and Non-Life Insurance Edition , which provides a comprehensive explanation of A.M. Best's rating process and highlights the different rating criteria employed. Additional key criteria utilized include: "Risk Management and the Rating Process for Insurance Companies"; "Catastrophe Risk Management Incorporated Within the Rating Analysis"; "Understanding BCAR for Canadian Property/Casualty Insurers"; "Rating Members of Insurance Groups"; "A.M. Best's Ratings & the Treatment of Debt"; and "Understanding BCAR for Life and Health Insurers." Methodologies can be found at www.ambest.com/ratings/methodology.

Founded in 1899, 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 [c] 2011 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
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Publication:Business Wire
Date:Apr 18, 2011
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