Allstate Canada and Pembridge ratings downgraded

Rating agency A.M. Best is downgrading the “public data” financial strength rating of Allstate Insurance Company of Canada to B+ from B++. The rating of Markham-based affiliate Pembridge Insurance Company is also downgraded to B- from B+.The new “public data” rating system just introduced by A.M. Best is an attempt to note the limited nature of data available for certain company ratings. This is as opposed to “interactive” ratings that include interviews with senior management and greater access to non-public information.The Allstate downgrade comes as a result of lagging operating results, says A.M. Best. “Due to struggling capital markets, realized capital gains have declined substantially with the company continuing to experience significant underwriting losses,” states an A.M. Best press release. It adds that the company’s losses in the Ontario auto market, where it has experienced adverse reserve development, is also a factor.Offsetting this is Allstate’s “adequate” level of capitalization, according to A.M. Best.The Pembridge downgrade not only reflects poor operating performance and unfavorable reserve development, but also the company’s increased exposure in the Ontario and Atlantic Canada markets. “Large net losses have eroded Pembridge’s previously strong capital position,” states the release. “Poor underwriting performance was primarily driven by unfavorable Ontario auto results.”At the same time, A.M. Best has affirmed the ratings of Dominion of Canada General Insurance Company and ING Canada.Dominion’s “excellent” level of capitalization, consistent operating results and strong market position helped maintain it’s A- public data rating. A.M. Best cites better than industry investment returns, leading to surplus growth, as a factor offsetting the overall poor market conditions in the Canadian p&c sector for Dominion. However, Dominion’s concentration of business in the troubled Ontario auto market and its reliance on capital gains were cited as mitigating factors in the rating.ING Canada’s A+ (Superior) rating is affirmed on the basis of “excellent” operating results, strong capitalization and leading market position. “Its underwriting results have consistently outperformed the industry, relying on strong fundamentals including disciplined underwriting and pricing, efficient in-house claims handling and geographic diversification,” states an A.M. Best release. “In recent years, the group’s regional diversification has allowed for consistency in underwriting results with favorable results in strong markets offsetting results in weaker markets.”The company’s investment management expertise and financial flexibility as a member of the global giant ING Group NV were also cited, as was its use of multiple distribution channels.A.M. Best notes that the purchase of Zurich’s personal lines and small to mid-market commercial business has given it a 12% marketshare in Canada’s p&c sector.However, the challenges of integrating Zurich’s book of business, and the difficulties faced by regulatory issues in Ontario, Alberta and Atlantic Canada, are offsetting factors.