S&P Affms 'Api' Rtg on Wawanesa Mutual -- U.S. Branch --
1 September 2000
S&P Affms 'Api' Rtg on Wawanesa Mutual -- U.S. Branch --
NEW YORK--Standard & Poor's--Aug. 31, 2000-- Standard & Poor's today affirmed its single-'Api' financial strength rating on Wawanesa Mutual Insurance Co. (U.S. Branch).Key rating factors include an extremely strong capital position and excellent profitability, partially offset by volatility in its premium growth and high geographic concentration. The company's major line of business is personal automobile insurance, written at preferred risk rates ranging from 25%-35% below standard manual rates.
Based in San Diego, Calif., the company commenced operation in 1975 and is licensed only in California. The company's initial funds were realized from a contribution from its Canadian parent, Wawanesa Mutual Insurance Co., of Winnipeg, Manitoba. (financial strength rating single-'Api'). In the U.S., the company maintains funds in trust sufficient to cover liabilities and statutory requirements for the exclusive benefit of U.S. Branch policyholders and creditors. U.S. Branch funds are subject to withdrawal only with the consent of the state insurance department.
Major Rating Factors:
| -- | At year-end 1999, capital adequacy, as measured by Standard & Poor's capital adequacy model, was extremely strong. The company's surplus, which stood at $133.2 million at year-end 1999, has grown at a compound annual rate of 23% since 1992. In addition, leverage, as measured by premium and liabilities to surplus, was conservative; the 1999 value was 1.2 times. |
| -- | Management has consistently displayed an ability to achieve above-average profitability, as measured by historical risk-adjusted ROR: The time-weighted rate of ROR has averaged 28.7% during the past five years, which is extremely strong. |
| -- | The company displays more volatility in its premium revenues than do companies receiving a higher rating. Year-to-year changes in net premiums written have varied from negative 16.8% to positive 21.4% since 1993. |
| -- | The company's two-year reserve development has been favorable but volatile, with an average redundancy ratio of 25.9% with respect to surplus since 1995. The redundancy ratios have ranged from 40.5% to 17.2% in the past five years. |
Although the company (NAIC:31526) is a subsidiary of Wawanesa Mutual Insurance Co., the rating does not include additional credit for implied group support.
'pi' ratings, denoted with a 'pi' subscript, are insurer financial strength ratings based on an analysis of an insurer's published financial information and additional information in the public domain. They do not reflect in-depth meetings with an insurer's management and are therefore based on less comprehensive information than ratings without a 'pi' subscript. 'pi' ratings are reviewed annually based on a new year's financial statements, but may be reviewed on an interim basis if a major event that may affect the insurer's financial security occurs. Ratings with a 'pi' subscript are not subject to potential CreditWatch listings.
Ratings with a 'pi' subscript generally are not modified with 'plus' or 'minus' designations. However, such designations may be assigned when the insurer's financial strength rating is constrained by sovereign risk or the credit quality of a parent company or affiliated group, Standard & Poor's said.--CreditWire