CCS : Outlook Stable, says S&P

Standard & Poor’s has announced:

  • •The Co-operators’ P/C operations have lagged the performance of the broader P/C sector and improvement in profitability and scale of the life operations have lagged original expectations.
  • •We are revising our outlook on Co-operators and its core operating subsidiaries to stable from positive, and affirming our ratings.
  • •The stable outlook reflects our expectation that Co-operators will maintain at least very strong capitalization and strong competitive position despite challenges expanding its life insurance operations and P/C underwriting performance.

… S&P Global Ratings said today it revised its outlook on Co-operators Financial Services Ltd. (Co-operators) and
its core operating life and property/casualty (P/C) insurance subsidiaries to stable from positive. We also affirmed our ‘BBB’ long-term issuer credit rating, senior unsecured debt rating, and preferred stock rating on Co-operators, and our ‘A-‘ financial strength rating on Co-operators’ core operating life and P/C insurance subsidiaries.

Co-operator General is typically the earnings engine for the group. However, given the company’s accelerated growth in a challenging P/C market, specifically Ontario auto, we expect underwriting performance for the P/C operations to lag the Canadian P/C market. Additionally, more frequent weather-related losses continue to strain the bottom line. For the first half of 2018, Co-operators General had a combined ratio of 107.7%, which was approximately 6 points worse than the 101.7% combined ratio the industry posted. This underperformance follows up 2017 results, when the company posted a combined ratio of 102.4% compared to the industry’s 96.4%. We expect underwriting performance to improve from year-to-date results, but lag the overall industry as Co-operators works through earning rate increases for both property and auto lines of business. The company will likely gain market share given publicly stated actions from competitors to reduce share in Ontario auto, which can improve their market position assuming they ultimately reach rate adequacy and improve the underwriting performance with minimal movement in retentions.

The outlook is stable. We expect profitability for the group to be driven by the P/C group, albeit at lower levels because of growth in difficult markets including Ontario and Alberta auto, and the frequency of weather-related

The affected issue is CCS.PR.C

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