Dominion Bond Rating Service is changing the rating trend for Co-operators General Insurance Co. to stable from negative, and confirming its preferred share rating.

The trend was set to negative on November 20, 2002, due to the companyls weak profitability and capital position, DBRS says. It now notes that results improved in 2003 for Co-op General and the outlook is favourable for 2004.

“Past rate increases helped the combined ratio improve to 103% in 2003 and a favourable 96% in Q1 2004, as compared with 109% reported in 2002, and pre-tax earnings increased to $70 million as compared with a loss of $4.1 million in the prior year,” DBRS says.

“Although a significant improvement was experienced in the automobile segment, which represents 54% of premiums, this area remains mired in political reforms in several jurisdictions,” it cautions. “The regulatory and legislative environment continues to be a challenge, with a negative public image of the overall industry now a major concern.”

The rating agency notes that regulators dictate pricing and rules governing claim payments, and it expects that recently announced rate freezes or rollbacks will “have a negative, but manageable, impact on future revenues for the company”.

“The strategic plan for the future is to emphasize its non-auto lines of business, especially home and commercial lines,” it says, “The company1s commercial insurance segment also reported improved earnings in 2003, helped by increased premiums and higher commercial policy growth, particularly in the province of QuĂ©bec. Despite the current uncertainty surrounding Ontario automobile insurance, full-year earnings are expected to improve in 2004, helped by a combined ratio that should be close to 100%, as well as additional focus on marketing aspects, including detailed reviews of agency efficiency and more effective customer target marketing using a multi-product theme.”