OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating (FSR) of B++ (Good) and the issuer credit rating (ICR) of “bbb+” of Echelon General Insurance Company (Echelon). In addition, A.M. Best has affirmed the FSR of B++ (Good) and the ICR of “bbb” of The Insurance Company of Prince Edward Island (ICPEI). The outlook for all ratings is stable. Concurrently, A.M. Best has affirmed the ICR of “bb+” of EGI Financial Holdings Inc. (EFH) [TSX:EFH], the publicly traded parent. The outlook for EFH’s ICR is negative. EFH and Echelon are domiciled in Ontario, while ICPEI is domiciled in Prince Edward Island.
The ratings and outlook for Echelon are based upon the company’s profitable operating results, good risk-adjusted capitalization and low exposure to catastrophic loss. As primarily a specialty auto insurer, the company has minimal property loss exposure to a catastrophic event of any appreciable size. These positive rating factors are partially offset by Echelon's varied underwriting results, concentration in the Ontario non-standard auto market and strong competitive market pressures.
The ratings and outlook of ICPEI reflect its good risk-adjusted capitalization and leadership position among the top five property/casualty insurance companies in Prince Edward Island. The company also provides EFH with growth and risk diversification outside the non-standard auto risks of Ontario. However, these positive rating factors are partially offset by an increased exposure to losses from severe weather in the Atlantic Maritime provinces.
The ratings of Echelon and ICPEI also consider that EFH is publicly traded on the Toronto Stock Exchange, affording potential greater financial flexibility.
The ratings of EFH are based primarily on the overall financial strength of its operating insurance company, Echelon. In addition to Echelon and ICPEI, EFH is the parent of CIM Reinsurance Company Ltd, a Barbados captive reinsurer, CUISA Managing General Agency Corporation, a British Columbia specialty insurance agency, and Qudos Insurance A/S, a vehicle for growing non-standard auto and program business primarily in the United Kingdom and Denmark. The outlook for EFH’s ICR reflects the potential challenges EFH could face given the premium growth and varied operating performance of these non-rated entities and the potential impact on the overall financial strength of the organization. A.M. Best will continue to closely monitor the results of these companies.
The ratings and outlook of Echelon and ICPEI could benefit from a consistently favorable earnings trend that outperforms peers in the long term, while maintaining strong risk-adjusted capitalization. However, the ratings and outlook of EFH and its Canadian insurance subsidiaries may come under negative pressure if an unfavorable earnings trend develops, underwriting and financial leverage increases significantly, risk-adjusted capital erodes and/or the relationship of the subsidiaries to EFH changes in a manner that affects the operations of the companies.
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.
Key insurance criteria reports utilized:
- Catastrophe Analysis in A.M. Best Ratings
- Evaluating Country Risk
- Rating Members of Insurance Groups
- Risk Management and the Rating Process for Insurance Companies
- Understanding BCAR for Canadian Property/Casualty Insurers
- Understanding Universal BCAR
This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best’s Ratings & Criteria Center.
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