A.M. Best Affirms Ratings of Co-operators Group Limited's Subsidiaries

    OLDWICK, N.J., December 21 /CNW/ - A.M. Best Co. has affirmed the
financial strength rating (FSR) of A- (Excellent) and the issuer credit rating
(ICR) of "a-" of Co-operators General Insurance Company (Co-operators General)

    A.M. Best also has affirmed the FSR of B++ (Good) and the ICR of "bbb" of
Co-operators General's wholly owned subsidiary, The Sovereign General
Insurance Company (Sovereign) (Alberta). In addition, A.M. Best has affirmed
the FSRs of B+ (Good) and the ICRs of "bbb-"of Co-operators General's other
wholly owned subsidiaries, L'Union Canadienne Compagnie D'Assurances (L'Union)
(Quebec) and COSECO Insurance Company (COSECO) (Ontario).

    Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and ICR of
"a" of Co-operators Life Insurance Company (Co-operators Life) (Saskatchewan).
Additionally, A.M. Best has affirmed the ICR of "bbb-" and debt rating of
"bbb-" on CAD 150 million 5.07% senior unsecured debentures, due July 2012 of
Co-operators Financial Services Limited (CFSL) (Ontario), the interim holding
company of Co-operators General and Co-operators Life. The outlook for all
ratings is stable.

    The ratings of Co-operators General reflect its superior capitalization
and strong, liquid balance sheet, positive earnings trend, geographic and
product line diversification, effective use of various distribution channels
and its experienced management team. The ratings also take into consideration
the company's market leadership position driven by its strong brand name

    Partially offsetting these positive rating factors are the current
downturn in the underwriting cycle for commercial lines products, increasing
claims frequency and severity, uncertainty of the long-term effects of
regulated pricing and product changes for auto insurance and potential
earnings volatility from the industry change to fair value accounting.

    The ratings of Sovereign, L'Union and COSECO are reflective of their
risk-adjusted capitalization relative to their ratings, good overall balance
sheet liquidity, positive profitability trends and their strategic roles
within the Co-operators group. Sovereign primarily offers mid to small
commercial lines coverage through independent brokers across Canada. L'Union
serves as Co-operators General's primary vehicle for distribution of
commercial and personal lines products through independent brokers in Quebec,
while COSECO offers personal lines products mostly through employer and
association groups, as well as on a direct basis. Leverage ratios have
improved from strong organic surplus growth while premium risk growth has
remained relatively flat. In addition, these companies benefit from cross
marketing opportunities and services they receive from affiliated companies.

    These rating strengths are offset in part by Sovereign's history of
reserve deficiencies, moderate exposure to property loss due to earthquakes in
western Canada, as well as competitive pricing pressure in its core commercial
lines. These concerns are mitigated, in part, by management's actions to focus
on core business by exiting less profitable personal lines and increasing
reserves. In addition, surplus is protected by a comprehensive reinsurance
program with mainly high quality reinsurers.

    The ratings of L'Union and COSECO recognize their respective financial
strengths and historically profitable operating performance, their strategic
roles within the Co-operators group, as well as each company's individual
challenges within their market niches.

    The ratings of Co-operators Life recognize its increased level of
profitability, surplus growth, which has led to a strong risk-adjusted capital
position and continued premium growth in its core business segments. It also
recognizes the premium growth the company has realized in its core business
segments, which offers a wide variety of products to individual, group and
credit union markets throughout Canada. Co-operators Life continues to face
challenges cross-selling to the property/casualty policyholder base through
their multi-line distribution, penetrating the Quebec market, while competing
with larger insurance organizations, and strong regional players.

    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. For more information, visit www.ambest.com.

For further information:

For further information: A.M. Best Company Analysts Charles Huber,
908-439-2200, ext. 5122 charles.huber@ambest.com or Richard McMillan,
908-439-2200, ext. 5615 richard.mcmillan@ambest.com or Public Relations Jim
Peavy, 908-439-2200, ext. 5644 james.peavy@ambest.com or Rachelle Morrow,
908-439-2200, ext. 5378 rachelle.morrow@ambest.com

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