Standard & Poor\u2019s Ratings Services today said it raised its long-term counterparty credit and financial strength ratings on Guelph, Ont.-based Co-operators General Insurance Co. (CGIC) to \u2018BBB\u2019 from \u2018BBB-\u2019.
At the same time, Standard & Poor\u2019s raised its long-term Canadian national scale preferred stock rating on the company to \u2018P-3\u2019 from \u2018P-3 (Low)\u2019 and its long-term global scale preferred stock rating to \u2018BB\u2019 from \u2018BB-\u2019. The outlook is positive.
\u201cThe insurer financial strength rating on CGIC reflects its position as one of Canada\u2019s larger property and casualty (P\/C) insurers; its strong ties to the co-operative\/credit union system; and its strong capitalization, asset quality, and liquidity,\u201d said Standard & Poor\u2019s credit analyst Donald Chu.
CGIC\u2019s much improved operating performance is attributed to the general improvement within the sector, and to internal changes brought about by a new CEO and executive team that took over in 2001. The company\u2019s customer relationship management and multi-product strategy seems to be gaining traction, as client satisfaction is at an all time high and customer retention remains stable.
S&P views CGIC ias a core subsidiary of The Co-operators Group Ltd. The challenges facing the company include the cyclical nature of this sector\u2019s operating performance, a very competitive business environment, the commodity-like nature of CGIC\u2019s products, and the consolidation occurring in the insurance and financial services industry.
As a stock company whose ownership is primarily from within the co-operative sector, CGIC does not have full access to the equity capital markets. S&P notes, however, that CGIC is not under pressure to declare any dividends to its stakeholders because they are primarily from within the co-operative sector, and thus internally generated cash can be used to fund growth and strategic initiatives.
The positive outlook on CGIC reflects the company\u2019s strong management team and Standard & Poor\u2019s expects the company will continue to experience a fundamental improvement in its operating performance and business franchise.
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