Coachman and SGI Subs Put on Financial Alert

Rating agency A.M. Best has downgraded the status of Ontario-based Coachman Insurance Co. to “B (fair)” from “B+”, and placed a negative outlook on other subsidiaries of Saskatchewan General Insurance (SGI). Overall, the rating agency has affirmed the “A- (excellent)” financial strength rating of SGI Canada with a stable outlook.

But, while subsidiaries SGI Canada Insurance Services Ltd. (SCISL) and The Insurance Co. of PEI (ICPEI) saw their “B+ (very good)” ratings affirmed, both have a negative outlook. SGI Canada has strong capitalization and support from its government parent, the Crown Investment Corp. of Saskatchewan, while SCISL and ICPEI both benefit from strong capital support, centralized investment management, reinsurance and other systems support provided by SGI Canada, the rating agency observes.

However, SCISL is being dragged down by out-of province subsidiaries ICPEI and Coachman, A.M. Best says. The rating agency takes a favorable view of SGI Canada’s attempt to spread its risk outside Saskatchewan, but says these subsidiaries are operating in difficult markets and have struggled with profitability. “The rating downgrade of Coachman is due to its diminishing capital position and continued loss of surplus as a result of poor operating performance.” However, the rating agency notes that Coachman has taken steps to protect surplus and improve results through higher rates and dropping unprofitable business, such as reducing its exposure to auto in Toronto. Nonetheless, “A.M. Best anticipates that the company may need additional capital if operating results do not improve in the near term”.