The rating agency assigned a “B++ (good)” financial strength rating to both Echelon and ICPEI.
It also affirmed the long-term issuer credit rating of Echelon as “bbb+”, ICPEI as “bbb” and its parent company EFH at “bb+”.
Echelon’s ratings are reflective of its balance sheet, categorised as “very strong”, in addition to its marginal operating performance, neutral business profile and appropriate enterprise risk management (ERM).
Partially offsetting these rating factors is Echelon’s concentration within Ontario’s auto market, with results adversely affected by accident claims severity over the last five years, in addition to strong competitive market pressures.
The ratings of ICPEI reflect the “adequate” strength of its balance sheet, its adequate operating performance, limited business profile and appropriate ERM.
ICPEI’s ratings are offset by the impact of weather-related underwriting losses in recent years.
The potentially greater financial flexibility derived from their parent company is also considered in the ratings of Echelon and ICPEI, as is its risk-adjusted capitalisation, operating earnings and low exposure to losses from natural catastrophes given each company’s respective focus.
According to A.M. Best, EFH’s ratings are based on the overall financial strength of Echelon and ICPEI, as well as its captive insurer CIM Reinsurance Company and specialty insurance agency CUISA Managing General Agency Corporation.
A.M. Best suggested that positive rating actions could occur for both Echelon and ICPEI should operating results improve to a level that materially outperforms that of similarly rated carriers.
Negative rating actions may occur if operating results decline due to a weakening in underwriting performance or if the relation to EFH change in a manner that affects company operations.