OLDWICK, N.J.--(BUSINESS WIRE)--
A.M. Best has affirmed the Financial Strength Rating (FSR) of B++
(Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb+”
of Echelon Insurance (Echelon), as well as the FSR of B++ (Good)
and the Long-Term ICR of “bbb” of The Insurance Company of Prince
Edward Island (ICPEI) (Prince Edward Island, Canada). Concurrently,
A.M. Best has affirmed the Long-Term ICR of “bb+” of Echelon and ICPEI’s
publicly traded parent, Echelon Financial Holdings Inc. (EFH)
[TSX:EFH]. The outlook of these Credit Ratings (ratings) is stable. All
companies are domiciled in Mississauga, Ontario, unless otherwise
specified.

The ratings of Echelon reflect its balance sheet strength, which A.M.
Best categorizes as very strong, as well as its marginal operating
performance, neutral business profile and appropriate enterprise risk
management (ERM).

The ratings of ICPEI reflect its balance sheet strength, which A.M. Best
categorizes as adequate, as well as its adequate operating performance,
limited business profile and appropriate ERM.

The ratings and outlooks for Echelon and ICPEI are based upon each
company’s risk-adjusted capitalization, operating earnings and low
exposure to losses occurring from natural catastrophes given each
company’s respective focus on non-standard and associated auto liability
lines of business. The ratings also consider the benefits derived from
the parent holding company, which is publicly traded on the Toronto
Stock Exchange, affording potentially greater financial flexibility.

These positive rating factors are offset partially by Echelon’s
concentration within Ontario’s auto market, with results adversely
affected by accident claims severity over the most recent five-year
period, as well as strong competitive market pressures. Despite sound
pre-tax operating earnings reported throughout the recent five-year
period, policyholder surplus has declined due to the ongoing stockholder
dividend payments to the parent for general use purposes, which has
constrained the company’s ability to improve its capital base.

Offsetting rating factors for ICPEI include the impact of
weather-related underwriting losses in recent years. While premium
volume is divided fairly evenly among Prince Edward Island, New
Brunswick and Nova Scotia, ICPEI’s lack of scale reflects its relatively
small geographic footprint, which may increase its exposure to losses
occurring from severe weather within the Atlantic Maritime provinces.

The ratings of EFH are based primarily on the overall financial strength
of its operating insurance companies, Echelon and ICPEI. In addition to
Echelon, EFH is the parent of CIM Reinsurance Company Ltd, a
Barbados captive reinsurer, and CUISA Managing General Agency
Corporation, a British Columbia specialty insurance agency.

Regarding future movement of Echelon’s ratings, positive rating actions
could occur should operating results improve to a level that materially
outperforms that of similarly rated carriers, while maintaining a strong
balance sheet through retained earnings. Conversely, negative rating
actions could occur should operating results decline due to a weakening
in underwriting performance. Additionally, negative rating actions also
may occur should the company’s balance sheet strength decline to a level
that is not in line with A.M. Best’s expectation due to either excessive
growth beyond expectation, or adverse reserve development, or if the
company’s relationship to its parent changes in a manner that affects
the company’s operations.

Regarding future movement of ICPEI’s ratings, positive rating actions
could occur should operating results improve to a level that materially
outperforms that of similarly rated carriers, while maintaining a strong
level of risk-adjusted capitalization through retained earnings.
Conversely, negative rating actions could occur should operating results
decline due to a weakening in underwriting performance. Negative rating
actions also may occur should the company’s risk-adjusted capitalization
decline to a level that is not in line with A.M. Best’s expectation, or
should the company’s relationship to its parent change in a manner that
affects the company’s operations.

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.

Copyright © 2017 by A.M. Best Rating Services, Inc. And/or its
affiliates. ALL RIGHTS RESERVED.

View source version on businesswire.com: http://www.businesswire.com/news/home/20171220006012/en/