Dominion Bond Rating Service and Standard & Poor’s Ratings Services are both out with ratings for E-L Financial Corp.’s new $100-million preferred share issue.

DBRS is assigning a rating of Pfd-2 (low) to the $100-million issue. S&P assigned its preliminary ‘P2(High)’ and ‘BBB+’ preferred share ratings to the issue. Standard & Poor’s also assigned its ‘A’ long-term and ‘A-1’ short-term counterparty credit ratings to E-L Financial. The outlook is stable, S&P says.

The ownership of E-L Financial — Hal Jackman controls 68% of the outstanding common shares of the firm — is considered a positive by DBRS. It enables the company and its major holdings, Empire Life Insurance Co. and The Dominion of Canada General Insurance Co., to have a conservative bias, a longer-term focus, and, a very modest dividend payout ratio, DBRS says.

“The ownership of both life and property and casualty insurance entities also provides some diversification and synergy benefits,” it says, noting that E-L has a “manageable but meaningful” exposure to the equity markets, which adds some degree of risk and volatility.

DBRS also says that it expects leverage for E-L Financial to remain modest. It maintains that Empire Life and Dominion General are relatively well-positioned, focused entities with conservative capital positions and satisfactory credit quality. “However, Empire Life is a mid-sized insurance company that is not a market leader and Dominion General also faces a variety of challenges related to its respective industry,” it says.

Standard & Poor’s credit analyst Daniel Koelsch says, the preliminary rating on E-L Financial’s preferred stock issue “reflects the company’s low leverage even after the preferred issue, its consistent investment strategy, and its long and successful track record of superior investment performance.”

“For more than 35 years, E-L Financial’s investments have exhibited a fairly stable performance path, reflecting its investment policy of long-term capital appreciation. Adequate cash flows, no leverage, and a portfolio of highly liquid securities provide for sufficient coverage to ensure and permit repayment of the incurred obligations under various stress scenarios,” S&P says.

“The stable outlook reflects Standard & Poor’s expectation that E-L Financial will continue to operate with minimal leverage. The current preferred share issue is considered to be opportunistic, representing a low-cost source of stable funds that will be invested in liquid securities similar to the current investment portfolio. No further debt or hybrid issues are expected,” it notes. “The ratings hinge on the successful continuation of the company’s long-term growth and favorable capital structure.”