Desjardins-Laurentian Financial Corporation: Upgrades to Pfd-2 (low)n

Jarmo Saari, CFA; Kent Wideman, CFA / 416-593-5577 ext.2257, ext.2235 / jsaari@dbrs.com

 

DBRS is upgrading the preferred share rating of Desjardins-Laurentian Financial Corporation (“DLFC”) to Pfd-2 (low)n from Pfd-3 (high)n with a Stable trend, reflecting improved financial results and an increased emphasis on the support of the larger parent, Desjardins Group (“DG”). DG (Mouvement des caisse Desjardins) is rated AA (low) by DBRS and had assets of $86 billion as at Q3 2002 and net income of $567 million for the nine months ended September 2002.  Although DG does not guarantee DLFC securities directly, DBRS considers the positive relationship with the parent an important factor in assessing the credit quality of DLFC. The financial results of DG have also shown significant improvement, especially in the financial intermediation (caisse network) operations, where major restructuring led to a 28% rise in profits in 2002. There is also a focus on branding, with the names of various operating entities recently changed to reflect the Desjardins connection. It is expected that as the DG continues to expand its brand and operations nationally, DLFC will continue to play a large role in future acquisitions/expansion. For further information on the Desjardins Group, see separate DBRS report dated September 10, 2002. DLFC will continue to work with the caisse network in order to maximize distribution benefits in the sale of wealth management and protection products, but will also develop its businesses outside of the network, including outside of Québec. Although certain operations were pressured by weak equity markets, DLFC reported favourable financial results to Q3 2002. Credit quality remained strong, and although debt levels had increased in the past with the purchase of CIBC’s property and casualty  (P&C) insurance operations, leverage and interest coverage ratios have improved in 2002.  The Company is one of the leading P&C insurers in Québec and its life/health insurance operations rank as the eighth largest in Canada. 

 

 

Dominion Bond Rating Service Limited (DBRS) has published a full report that provides additional analytical detail.  To see this report, please click on http://www.dbrs.com/web/sentry?COMP=2900&DocId=119080.  If you do not have access to this document, please contact us at info@dbrs.com.