A.M. Best has placed under review with positive implications the issuer credit rating of “bb” of Echelon Financial Holdings Inc. (EFH) [TSX: EFH] following the recent announcement that EFH has signed a stock purchase agreement to sell off its subsidiary Qudos Insurance A/S (Qudos), a vehicle that writes non-standard auto and program business primarily in Ireland, the United Kingdom and Denmark.
The transaction is expected to enable EFH to divest its holdings in overseas markets and allow its Canadian operating subsidiaries, Echelon Insurance (Echelon) and The Insurance Company of Prince Edward Island (ICPEI) to refocus and concentrate their efforts in improving their core businesses lines in Canada. In addition, the transaction should help to improve the risk-adjusted capital positions of each operating entity. The agreement is subject to the approval of regulatory authorities. On June 23, 2016, A.M. Best affirmed the financial strength rating (FSR) of B++ (Good) and the ICR of “bbb+” of Echelon, as well as the FSR of B++ (Good) and the ICR of “bbb” of ICPEI (see related press release).
EFH’s rating will remain under review until the close of the transaction and the conclusion of A.M. Best’s assessment of its impact on the rating.