AM Best Takes Various Credit Rating Actions on Travelers Insurance Company of Canada and The Dominion of Canada General Insurance Company; Affirms Credit Ratings of Definity Financial Corporation

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has removed from under review with negative implications and downgraded the Financial Strength Rating (FSR) to A (Excellent) from A+ (Superior) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “a” (Excellent) from “aa-” (Superior) of Travelers Insurance Company of Canada (TICC). At the same time, AM Best has removed from under review with developing implications and affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” (Excellent) of The Dominion of Canada General Insurance Company (Dominion). The outlook assigned to these Credit Ratings (rating) is stable. Dominion and TICC are domiciled in Toronto, Ontario, Canada.

In addition, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” (Excellent) of Definity Insurance Company (Definity). Lastly, AM Best has affirmed the Long-Term ICR of “bbb” (Good) of Definity Financial Corporation (Definity Financial), the ultimate parent of the aforementioned companies. The outlook of these ratings is stable. Definity and Definity Financial are domiciled in Waterloo, Ontario, Canada.

The ratings of TICC reflect its balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM).

The rating downgrades reflect a lower business profile assessment following the acquisition by Definity Financial. As part of the transaction, TICC did not retain its surety operations, which historically represented a material component of its business mix and earnings profile. The removal of the surety portfolio results in increased concentration in specialty lines and reduced product and earnings diversification. TICC maintains solid risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), a disciplined underwriting approach and has a longstanding position as a leading Canadian specialty lines insurer. The ratings also consider Definity’s strategic intent to grow and further develop TICC’s specialty platform over time.

The ratings of Dominion reflect its balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, neutral business profile and appropriate ERM.

The rating affirmations reflect no material change to the underlying rating fundamentals following Dominion’s acquisition by Definity Financial and recognizes ongoing integration initiatives and underwriting actions aimed at improving profitability and enhancing long-term performance. While Dominion’s operating performance is viewed as marginal, the affirmations reflect the expectation that corrective underwriting measures, pricing actions and operational efficiencies will support improved earnings stability over time.

The ratings of Definity reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM.

The rating affirmations reflect Definity’s very strong risk-adjusted capitalization, as measured by BCAR, supported by prudent reserving practices and a conservative investment portfolio, alongside solid operating performance and a well-established business profile within the Canadian property/casualty insurance market. The company’s five-year trend of profitability has been driven by disciplined underwriting, streamlined claims management and targeted operational improvements, further enhanced by investments in underwriting, claims and distribution capabilities. The integration of sophisticated pricing models and predictive analytics has strengthened portfolio quality and profitability, solidifying Definity’s competitive position. The acquisition of the Canadian operations of The Travelers Companies, Inc. elevates Definity’s market position to No. 4 in Canada’s property/casualty insurance industry, providing increased product offerings, distribution access and specialized expertise in commercial and specialty lines, while enhancing the scale of core personal lines and creating opportunities for expense synergies that support improved earnings and overall returns.

The holding company’s ratings benefits from strong financial flexibility, liquidity and access to capital markets. Goodwill and intangible assets are elevated as a result of the recent acquisitions, including the Canadian operations of The Travelers Companies, Inc. and broker acquisitions. Financial leverage increased at the time of the acquisition; however, this is viewed as temporary and is expected to normalize in the near term as acquisition-related debt is repaid, while interest coverage remains strong. The expectation is that Definity Financial will maintain proforma leverage and interest coverage ratios within an appropriate range for its current ratings.

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