A.M. Best Affirms and Assigns Ratings to Wawanesa Insurance Companies

OLDWICK, N.J., OCTOBER 25, 2007
A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and assigned issuer credit ratings (ICR) of "aa" to The Wawanesa Mutual Insurance Company (WMIC) (Winnipeg) and The Wawanesa Mutual Insurance Company (United States Branch). Additionally, A.M. Best has affirmed the FSR of A (Excellent) and assigned an ICR of "a" to WMIC's wholly owned life/health subsidiary, The Wawanesa Life Insurance Company (Wawanesa Life) (Winnipeg). The outlook for the FSRs is stable, and the outlook assigned to the ICRs is stable.

A.M. Best also has affirmed the FSR of A+ (Superior) and assigned an ICR of "aa-" to WMIC's wholly owned subsidiary, Wawanesa General Insurance Company (WGIC) (San Diego, CA). The outlook for the FSR has been revised to negative from stable, and the outlook assigned to the ICR is negative.

The ratings of WMIC are based on its superior level of capitalization and strong, liquid balance sheet supported by profitable operating performance, geographic diversification and its market position among the Canadian property/casualty insurance industry leaders, as well as WMIC's diversified product mix and experienced management team.

These rating strengths are offset in part by the challenges WMIC faces in the personal lines automobile market due to regulatory reforms, increasing claims frequency, increased competitive pricing pressures mainly on commercial lines business and the weaker capitalization and operating performance of WGIC in the United States.

WGIC's revised rating outlook is due to a decline in its risk-adjusted capitalization and a continuance of its below average operating performance, which are not consistent with its current ratings. Partially offsetting these rating weaknesses is the explicit financial support of WGIC's Superior rated parent, WMIC, and WGIC's competitive marketing strategies as a direct writer in the California personal auto and property markets.

The ratings of Wawanesa Life recognize its strong risk-adjusted capital position, profitable operations and the support it receives from WMIC through shared management, operating platforms and common customer base. Wawanesa Life continues to compete in markets dominated by considerably larger players, which have significant economies of scale to drive down unit costs.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers.