AM Best Removes From Under Review With Negative Implications, Downgrades Credit Ratings of Universal North America Insurance Company

OLDWICK, N.J.--(BUSINESS WIRE)--
AM Best has removed from under review with negative implications and downgraded the Financial Strength Rating to B+ (Good) from B++ (Good) and the Long-Term Issuer Credit Rating to “bbb-” (Good) from “bbb” (Good) of Universal North America Insurance Company (UNAIC) (Arlington, TX). The outlook assigned to these Credit Ratings (ratings) is negative.

The ratings reflect UNAIC’s balance sheet strength, which AM Best assesses as adequate, as well as its marginal operating performance, limited business profile and marginal enterprise risk management.

The rating downgrades reflect AM Best’s view that UNAIC’s balance sheet strength no longer supports the strong assessment and a revision in its business profile assessment to limited from neutral. The company’s policyholder surplus declined approximately 50% over the most recent five-year period, despite capital contributions from its ultimate parent totaling $42.5 million over the same period. The weakened capital position and leverage measures reflect UNAIC’s increased vulnerability to reinsurance dependence and reserve inadequacy.

Partially offsetting these negative factors are the company’s comprehensive reinsurance program with strong partners and stable loss-reserving trends. UNAIC’s operating results have been volatile and have driven the surplus decline due to weather-related losses throughout its operating territories in recent years. Underwriting results trail its composite averages by a significant margin and are driven by elevated loss ratios. In 2021, the company implemented a strategy to improve profitability by reducing its footprint in its operating territories, shifting its product mix to a higher concentration in the homeowners line and shedding unprofitable business. This strategy has changed AM Best’s view of UNAIC’s business profile assessment to limited, given the higher concentration of the book of business; however, the company maintains geographic diversification as it is currently operating in 14 states.

Along with this rating action, AM Best has increased the level of lift that UNAIC receives via the Universal Group, Inc.’s ongoing support in the form of capital contributions, as well as operational and technological support.

This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2023 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Janet Hernandez
Senior Financial Analyst

+1 908 882 1890

[email protected]

Christopher Sharkey
Associate Director, Public Relations

+1 908 882 2310

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Joseph Burtone
Director

+1 908 882 1678

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Al Slavin
Senior Public Relations Specialist

+1 908 882 2318

[email protected]

Source: AM Best