A.M. Best Affirms Ratings of The Co-operators Group Limited’s Subsidiaries and Co-operators Financial Services Limited

A.M. Best Co. has affirmed the financial strength ratings (FSR) and issuer credit ratings (ICR) of the subsidiaries of The Co-operators Group Limited (The Co-operators). In addition, A.M. Best has affirmed the ICR of “bbb-” and the senior debt rating of “bbb-” on CAD 150 million 5.07% senior unsecured debentures, due July 2012 of Co-operators Financial Services Limited (CFSL) (Ontario), an interim holding company.

Concurrently, A.M. Best has affirmed the debt ratings of “bbb-” of the preferred shares issued by Co-operators General Insurance Company (Co-operators General) (Ontario) [TSX: CCS.PR.C and CCS.PR.D]. The outlook for all ratings is stable. (Please see below for a detailed listing of the companies and ratings.)

The ratings of Co-operators General are reflective of its strong capitalization, generally historically profitable operating performance as well as its market leadership position driven by strong brand name recognition, product line and geographic diversification and effective use of subsidiaries and multiple channels of distribution.

Partially offsetting factors are Co-operators General’s continued soft market in the commercial lines sector, strong competitive pressure in personal lines, challenging automobile markets and a trend of more frequent and severe losses from storms across Canada.

The ratings of The Sovereign General Insurance Company (Sovereign) (Alberta), L’Union Canadienne Compagnie D’Assurances (L’Union) (Quebec) and COSECO Insurance Company (COSECO) (Ontario) recognize their risk-adjusted capitalization relative to their ratings, good overall balance sheet liquidity and their strategic roles within the Co-operators group. Furthermore, COSECO’s higher than expected underwriting losses were partially offset by additional capital provided by Co-operators General.

The rating of Co-operators Life Insurance Company (Co-operators Life) (Saskatchewan) acknowledges its strong risk-adjusted capital position, very good level of profitability and continued premium growth in its core business segments. The company offers a wide variety of products to individual, group and credit union markets throughout Canada.

Partially offsetting these strengths are Co-operators Life’s challenges to successfully penetrate the Quebec market, transition issues as it integrates the CUMIS acquisition and the potential impact of the current economic environment on the company’s new sales and premium growth. The CUMIS acquisition should further strengthen and diversify the company’s business profile, but full integration will take some time to complete.

The FSR of A- (Excellent) and ICR of “a-” have been affirmed for Co-operators General Insurance Company, a subsidiary of The Co-operators Group Limited.

The FSR of B++ (Good) and ICR of “bbb” have been affirmed for The Sovereign General Insurance Company, a subsidiary of The Co-operators Group Limited.

The FSRs of B+ (Good) and ICRs of “bbb-” have been affirmed for COSECO Insurance Company and L’Union Canadienne Compagnie D’Assurances, both subsidiaries of The Co-operators Group Limited. Sovereign, COSECO and L’Union are wholly owned subsidiaries of Co-operators General Insurance Company.

The FSR of A (Excellent) and ICR of “a” have been affirmed for Co-operators Life Insurance Company, a subsidiary of The Co-operators Group Limited.

The following debt ratings have been affirmed:

Co-operators General Insurance Company—

-- “bbb-” on $100 million non-cumulative 5-year reset Class E preference shares, Series D (plus a $15 million over allotment of these shares)

-- “bbb-” on $100 million non-cumulative redeemable Class E preference shares, Series C

For Best’s Credit Ratings, an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at http://www.ambest.com/ratings/methodology.