A.M. Best Downgrades Ratings of United Automobile Insurance Company

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has downgraded the financial strength rating to C (Weak) from C++ (Marginal) and the issuer credit rating to “ccc” from “b” of United Automobile Insurance Company (United Auto) (Miami Gardens, FL).The outlook for both ratings has been revised to negative from stable.

The rating actions follow United Auto’s adverse reserve development reported in the second quarter of 2012, resulting in a significant underwriting loss and surplus decline in excess of 35%. The ratings of United Auto reflect its weak risk-adjusted capitalization and poor operating results in recent years. United Auto has maintained elevated underwriting leverage measures in recent years, which has weakened its risk-adjusted capital position. Moreover, the company maintains a somewhat modest business profile with limited product availability and concentration in states with difficult operating environments for the non-standard automobile segment.

The negative outlook reflects United Auto’s reduced surplus and decline in its risk-adjusted capitalization. The outlook further considers the company’s ongoing challenges to improve underwriting results over the near term and avoid additional surplus losses.

However, United Auto has implemented corrective actions, tightened its policy language and increased its rates. In addition, policy fee income has somewhat offset the underwriting shortfalls in recent years, and United Auto maintains good local market knowledge.

Factors that could result in future negative rating actions include a continued deterioration in United Auto’s underwriting performance, adverse reserve development or erosion of its capital base.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies” and “Understanding BCAR for Property/Casualty Insurers.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2012 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.

A.M. Best Co.
Frederick DeLeon
Senior Financial Analyst
908-439-2200, ext. 5175
[email protected]
or
Rick Decker
Assistant Vice President
908-439-2200, ext. 5423
[email protected]
or
Rachelle Morrow
Senior Manager, Public Relations
908-439-2200, ext. 5378
[email protected]
or
Jim Peavy
Assistant Vice President, Public Relations
908-439-2200, ext. 5644
[email protected]

Source: A.M. Best Co.