The revised outlooks reflect the company’s weakening solvency position and an unfavorable trend in underwriting performance. Based on recent financial results, the company’s underwriting profitability shows a downward trend, due to worse-than-expected claims experience emerging from its recently launched full replacement extended warranty cover.

The Credit Ratings (ratings) reflect PCL’s adequate risk-adjusted capitalization and conservative investment portfolio. Risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio, remains marginally supportive of its current ratings. Despite poor claims experience in recent years, consistent investment income has helped offset volatility and absorb the negative underwriting results, thus contributing to overall positive results. 

The outlooks could be revised back to stable if the company can reverse its poor underwriting performance trend. Negative rating actions could arise if PCL’s capital position further erodes or the unfavorable earnings trend persists. Furthermore, negative rating actions could occur if 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 Credit Ratings 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. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases. 

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