OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a+” of The Wawanesa Mutual Insurance Company (Wawanesa Mutual). A.M. Best also has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” of Wawanesa Life Insurance Company (Wawanesa Life). Concurrently, A.M. Best has upgraded the FSR to A (Excellent) from A- (Excellent) and the Long-Term ICR to “a” from “a-” for Western Life Assurance Company (Western Life). All companies are headquartered in Winnipeg, Manitoba, Canada. The outlook of these Credit Ratings (ratings) is stable.
Additionally, A.M. Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” of Wawanesa General Insurance Company (Wawanesa General) (San Diego, CA). The outlook of these ratings is negative.
The ratings of Wawanesa Mutual reflect its balance sheet strength, which A.M. Best categorizes as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM). The stable outlooks reflect the adequate operating results driven by investment earnings that have generally offset underwriting losses and driven organic growth in policyholder surplus.
The ratings of Wawanesa General reflect its balance sheet strength, which A.M. Best categorizes as very strong, as well as its weak operating performance, limited business profile and appropriate ERM. The ratings also consider the implicit and explicit support received from its ultimate parent, Wawanesa Mutual, given Wawanesa Mutual’s role as the lead rating unit within the organization. In addition, the ratings consider the benefits Wawanesa General receives from the capital maintenance agreement that is in place to support risk-adjusted capitalization as needed. Wawanesa General provides Wawanesa Mutual with a U.S.-based platform writing private passenger standard auto insurance. The rating outlooks reflect the ongoing weak operating results driven by sustained underwriting losses, which have reduced policyholder surplus during the past five-year period.
The ratings of Wawanesa Life reflect its balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM.
Wawanesa Life’s risk-adjusted capitalization, as defined by Best’s Capital Adequacy Ratio (BCAR), is assessed as strongest, which is supported by overall good credit quality of invested assets, low use of reinsurance and no financial leverage. The company has historically had positive earnings trends, despite reporting a net loss in 2017 due to the write-down of a systems application and acquisition expenses related to the purchase of Western Life. Wawanesa Life is considered strategically important to its parent company, Wawanesa Mutual, as it provides options to offer life, annuity, accident and sickness, and disability products to the property/casualty client base and broker channel. The Western Life acquisition will allow the company to expand its business profile with minimal overlap to Wawanesa Life’s product offerings and distribution, as Western Life offers non-participating products through a multi-channel distribution network. The rating upgrades for Western Life reflect its strategic importance and integration with Wawanesa Life.
Partially offsetting these factors is that Wawanesa Life and Western Life are part of a highly competitive market, which is dominated by three large insurers that possess size and scale advantages. In addition, the life companies may face challenges to execute on their long-term strategy of increasing efficiencies and synergies.
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