|[December 20, 2012]
A.M. Best Affirms Ratings of Echelon General Insurance Company and EGI Financial Holdings Inc.
OLDWICK, N.J. --(Business Wire)--
A.M. Best Co. has affirmed the financial strength rating of B++
(Good) and issuer credit rating (ICR) of "bbb+" of Echelon
General Insurance Company (Echelon). Concurrently, A.M. Best has
affirmed the ICR of "bb+" of Echelon's publicly traded parent, EGI
Financial Holdings Inc. (EFH). The outlook for all ratings is
stable. Both companies are domiciled in Mississauga, Ontario.
The ratings and outlook for Echelon are based upon the company's good
risk-adjusted capitalization, historically profitable earnings as a
result of strong net investment income and low exposure to catastrophic
loss. As primarily a non-standard auto insurer, the company has minimal
property loss exposure due to a catastrophic event of any appreciable
size. The ratings also consider that the parent holding company is
publicly traded on the Toronto Stock Exchange, affording potential
greater financial flexibility to raise equity during favorable markets.
These positive rating factors are partially offset by Echelon's varied
underwriting results in recent years, concentration in the Ontario
non-standard auto market, strong competitive market pressures and soft
market pricing conditions in other lines of business.
The rtings of EFH are based primarily on the overall financial strength
of its operating insurance company, Echelon. In addition to Echelon, EFH
is the parent of CIM Reinsurance Company Ltd, a Barbados captive
reinsurer, CUISA Managing General Agency Corporation, a British Columbia
specialty insurance agency, American Colonial Insurance Company
and Qudos Insurance A/S, vehicles for growing business in the
non-standard auto market in the United States and program niche business
in Europe, respectively. A.M. Best will closely monitor the growth of
these unrated entities and progress of these companies and their
potential impact on the overall financial strength of the organization.
The ratings and outlook of EFH and/or Echelon could benefit from a
consistently favorable earnings trend that outperforms peers in the long
term, while maintaining strong risk-adjusted capitalization.
However, the ratings and outlook of EFH and/or Echelon may come under
negative pressure if an unfavorable earnings trend develops,
underwriting and financial leverage increases significantly, and/or risk
adjusted capital erodes.
The methodology used in determining these ratings is Best's Credit
Rating Methodology, which provides a
comprehensive explanation of A.M. Best's rating process and contains the
different rating criteria employed in the rating process. Key criteria
utilized include: "Risk Management and the Rating Process for Insurance
Companies"; "Understanding BCAR for Canadian Property/Casualty
Insurers"; and "Rating Members of Insurance Groups." Best's Credit
Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
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