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S&P acts swiftly after Cooper Gay Swett & Crawford sale bombshell

Posted On: Nov. 17, 2015 12:00 AM CST

Cooper Gay Swett & Crawford Ltd.'s stunning announcement that it is selling its North American business unit could have been affected by market softness, and it now has analysts taking a hard look at the company.

Standard & Poor's Corp. on Friday moved to put Cooper Gay under review based on the decision to sell the North American business.

“The CreditWatch placement follows CGSC's announcement that it will pursue a sale of its North American business unit, CGSC North America,” S&P said in its Friday note.

S&P noted that through the first three quarters of the year, the North American unit totaled 60% of group revenues and 78% of group profits.

“Accordingly, a potential sale of this division and use of proceeds will have a material impact on the group's credit profile,” said S&P.

In its Sept. 30 research report, Moody's Investors Service Inc. noted how soft market conditions may be hurting the broker

“While CGSC has a good market presence as a wholesale and reinsurance broker and is well diversified across geographic regions and business lines, declines in revenue and earnings in part reflect negative pricing and volume trends in the reinsurance sector,” said Moody's.

“We assigned a negative outlook to the company in August 2015 after second-quarter results continued to underperform our expectations. Performance continued to deteriorate in the third quarter,” S&P said.

Indeed, Cooper Gay was first rated by S&P in March 2013 at B with a stable outlook but has seen its situation worsen over time.

“Since then, performance trends have been on decline,” said Julie Herman, New York-based director of insurance rating at S&P.