The ratings of PCL mainly reflect the company’s consistently strong operating performance. Although PCL’s risk-adjusted capitalization has declined in recent years as a result of the strain of taking on new business, it has remained adequate and supportive of the current rating level, underpinned by robust earnings derived from its strong technical earnings and consistent investment returns. PCL’s operating performance is strong as demonstrated by a return on equity of approximately 15%.

These positive rating factors are mainly offset by PCL’s elevated level of ceded leverage from the extensive use of reinsurance. In addition, despite strong underwriting and operating performance, PCL has a limited business profile as a monoline writer relying on one external distributor to provide all premium revenue.

While positive rating actions are unlikely, the ratings may come under negative pressure if PCL’s capital erodes, an unfavorable earnings trend develops or the consolidated financial performance of its ultimate parent deteriorates.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to rating(s) that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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