Best’s News & Research Service - June 15, 2012 03:09 PM (EDT)
A.M. Best Affirms Ratings of Insurance Subsidiaries of Western Financial Group, Inc.
OLDWICK, N.J. //BestWire// - A.M. Best Co. has affirmed the financial strength rating (FSR) of A- (Excellent) and issuer credit rating (ICR) of “a-” of Western Life Assurance Company (WLA) (High River, AB, Canada). Concurrently, A.M. Best has affirmed the FSR of A- (Excellent) and ICR of “a-” of Western Financial Insurance Company (WFIC) (Winnipeg, MB, Canada). The outlook for all ratings is stable.
The ratings of WLA reflect its stable risk-adjusted capitalization, increasing premium production and positive operating earnings. Risk-adjusted capitalization continues to be enhanced by the high quality of the investment portfolio, which contains no below investment grade bonds, mortgages or real estate holdings. Over the last five years, WLA has recorded consistently positive operating results, which have enhanced aggregate capital levels. WLA also has maintained growth in its core markets, with the group accident and sickness being the largest contributing segment by earnings and premium income. WLA also continues to derive benefits from being a member of the Desjardins Financial Group (Desjardins) as demonstrated by the recent reinsurance agreement with Desjardins, which will help improve its Canadian regulatory capital ratio going forward and allow for better capital deployment within Desjardins.
Going forward, WLA will continue to face challenges in achieving greater market share as a smaller niche player in Canada. The group and the individual accident and sickness market continues to be impacted by competition from larger, nationally recognized companies. Despite the marked increase in growth over the last several years, the company has not yet attained meaningful economies of scale.
The ratings and outlook of WFIC are reflective of the company's strong risk-adjusted capitalization, sound pure loss ratios and conservative investment profile. The ratings also reflect the greater financial flexibility and anticipated support provided by its ultimate parent company, Desjardins. WFIC is a specialty writer and a market leader of pet insurance in Canada. A.M. Best believes the company is well positioned in its underwriting guidelines to prospectively maintain positive operating results.
Factors that may lead to positive rating actions for WLA and WFIC include further profitable organic growth and the continuation of favorable trends in risk-adjusted capitalization. Key factors that could result in a negative rating action include deterioration in the financial strength of the companies’ ultimate parent, Desjardins Financial Group, a significant or sustained decline in risk-adjusted capitalization or operating performance that does not meet A.M. Best's expectations over a sustained period.
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. Key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Life/Health Insurers”; Understanding BCAR for Property/Casualty Insurers”; and “Rating Members of Insurance Groups.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.