Canadian P&C outlook stable to year-end: A.M. Best

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Best TEXT SIZE 2012-09-06 -------------------------------------------------------------------------------- The outlook for the Canadian property and casualty market for the remainder of 2012 is stable, with a low level of change to companies’ ratings, notes a senior financial analyst with A.M. Best Company. This is despite economic uncertainty in many parts of the world, Jackie Catrino Lentz commented during the rating agency’s 2012 Insurance Market Briefing in Toronto on Sept. 6. “We see no significant drivers emerging currently that would indicate a near-term change to the stable outlook.” The vast majority, 97%, of companies are “secure” in terms of financial strength rating (FSR), Catrino Lentz said. Industry consolidation from mergers and acquisitions has led to movement in ratings, mainly companies improving their ratings. “Companies are looking for market share in a very competitive environment,” she said. Among the top 10 rated companies, which include companies that have seen M&A activity in recent months, market share has grown from 58% to 68% between 2007 and 2011, she added. Since 2011, there also have been no ratings downgrades. While the first six months of 2012 have developed favourably, severe weather events in various provinces across Canada may have a negative impact in 2012 Q3. Results for the P&C market overall have been very favourable compared to the last three years, with the auto segment helping to drive the industry to a modest underwriting profit. That strength has been offset by severe damage from major storms across Canada and the United States, including the Slave Lake fire and hail storms in Alberta, Catrino Lentz said. In the coming year, industry consolidation will continue to be a key issue and may test companies’ abilities to merge cultures and even leadership styles, she added. Some companies may have to simplify their business models and refocus on profitable lines, she added.