A.M. Best has affirmed the financial strength rating of A-
(Excellent) and the issuer credit rating (ICR) of “a-” of Trisura
Guarantee Insurance Company (Trisura), (Toronto, Ontario, Canada).
The outlook for both ratings remains stable.
These rating affirmations are based on the company's continued levels of
solid risk-adjusted capitalization, favorable underwriting and operating
profitability, the support of their ultimate parent, Brookfield Asset
Management Inc. (Toronto, Ontario, Canada) [NYSE: BAM], and strong
brand recognition through its consistent business strategy. Partially
offsetting these positive rating factors are competitive market
pressures, a slightly elevated underwriting expense ratio,
macro-economic pressures currently existing in Canada and continued soft
market conditions.
The positive rating factors are derived from the company's consistent
operating profitability, driven by positive underwriting results and
strong investment income. As a result, pre-tax operating returns on
revenue and equity remain favorable and overall risk-adjusted
capitalization continues to improve. These favorable results, along with
positive operating cash flows, have continued through 2014, and have
helped the company maintain good overall liquidity. Trisura remains
committed to the broker distribution channel in Canada to help promote
its focus on small- to medium-size market risks. Although Trisura is
relatively new to the market, its management team continues to
demonstrate their industry expertise and depth of knowledge in their
product base.
Partially offsetting these positive factors are competitive market
pressures that continue to reflect the soft market conditions in the
liability and fidelity lines, and the impact of a weak economy on the
surety lines. Additionally, the company has ramped up its personnel to
support future business, and as a result, remains affected by an
elevated underwriting expense ratio as it grows into its support
structure. While the company's equity continues to support premium and
liability exposures, A.M. Best believes reductions in government
spending under challenging economic conditions, along with existing soft
market conditions, will continue to require management to balance strong
operating results with a measured risk appetite over the midterm.
A.M. Best does not expect any revision to the stable outlook on the
ratings of Trisura in the near to intermediate term. However, negative
ratings actions could occur if the group were to incur material losses
in its capitalization; have a severe reduction in the profitability of
its core book of business; be unable to contain the group's exposure to
premium growth with the current set of preventative measures; or have
substantial adverse reserve development relative to its peers, as well
as the industry average.
Concurrently, A.M. Best has withdrawn the ICR of “bbb-” of 6436978
Canada Limited (Toronto, Ontario, Canada), Trisura’s immediate
holding company, as it is no longer applicable in the rating process.
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. Best’s Credit Rating Methodology can be
found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world's oldest and most authoritative
insurance rating and information source. For more information, visit www.ambest.com.
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