CCS Upgraded by S&P

Standard & Poor’s has announced:

  • Following a review under our revised insurance criteria, we are raising our ratings on Co-operators Financial Services Ltd. and its operating subsidiaries Co-operators General Insurance Co. and Co-operators Life Insurance Co.
  • Our ratings on the group reflect its strong business risk profile as a top multiline insurer in Canada with well-established multichannel distribution platforms, as well as its very strong financial profile.
  • The stable outlook reflects our view that the group will sustain its strong competitive position and very strong capital adequacy.

In our view, Co-operators’ life insurance operations are exposed to low industry risks due to high barriers to entry in a market dominated by a small number of life insurers and a strong institutional framework where the primary regulator, the Office of the Superintendent of Financial Institutions (OSFI), maintains highly effective oversight of the industry. OSFI’s primary solvency metric, the minimum continuing capital and surplus requirements (MCCSR) ratio, comprehensively captures all insurance risks in each domestic life insurer and their respective international subsidiaries.

Insurance products in Canada generally have less aggressive guarantees, bolstering our view of low industry risk, which has a strong track record of very tight asset-liability matching. This matching is needed because of financial reporting and a regulatory framework that applies fair-value accounting principles equally to both sides of the balance sheet. The framework also tends to be pro-cyclical, leading to earlier recognition of
long-term adverse macroeconomic effects and reporting of relatively conservative financial results. But we see sensitivity to interest rates and equity-market volatility as somewhat offsetting these strengths and burdening long-term operating return prospects. We believe a weak global economy, persistent low interest rates, and established competition limit the sector’s growth prospects and potential for higher operating margins.

This follows the positive outlook announced in October 2012.

Cooperators’ is the proud issuer of CCS.PR.C and CCS.PR.D. The S&P rating on these issues is now P-2, up from P-2(low).

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