AM Best Revises Outlooks to Negative for Universal North America Insurance Company; Affirms Credit Ratings of Universal Insurance Company (PR)

OLDWICK, N.J.--(BUSINESS WIRE)-- AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” of Universal North America Insurance Company (UNAIC) (Arlington, TX). Concurrently, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” of Universal Insurance Company (PR) (UIC) (Guaynabo, PR). The outlook of UIC’s Credit Ratings (ratings) is stable.

The ratings of UNAIC reflect its balance sheet strength, which AM Best categorizes as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The ratings also reflect the implicit support received from UNAIC’s ultimate parent, Universal Group, Inc.

The revised outlooks to negative largely reflect the decline in UNAIC’s operating performance in the most recent years, which has placed pressure on AM Best’s current assessment of adequate. While the operating performance has been impacted by recent hurricane activity (2017 and 2018), the negative outlooks also consider the underlying performance, which has been impacted unfavorably by other weather-related losses, such as wildfires in California. The company has implemented a number of initiatives to improve underwriting performance, including rate increases, non-renewal of unprofitable accounts and investing in new technology.

UNAIC’s balance sheet assessment is supported by its strong level of risk-adjusted capitalization, its conservative investment portfolio, stable loss reserving trends and comprehensive reinsurance program. These positive factors are offset partially by the company’s high underwriting leverage and its significant catastrophe exposure, as evidenced by the weather events in 2017 and 2018. AM Best’s assessment of UNAIC’s business profile reflects the company’s solid geographic spread of risk and range of personal property products. Weather-related events continue to be UNAIC’s primary risk, and part of its ERM program has been centered appropriately around mitigating this exposure through a comprehensive reinsurance program, strategic placement of coverage and strict underwriting guidelines.

The ratings of UIC reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM.

UIC’s balance sheet strength is supported by its strongest level of risk-adjusted capitalization, stable loss reserving trends, and solid liquidity measures that are enhanced by positive operating cash flows. Partially offsetting these positive factors are UIC’s high-ceded leverage and ongoing stockholder dividend payments. The company has produced solid operating earnings over the long term, primarily driven by strong investment earnings, and other income coupled with variable underwriting results. UIC’s business profile reflects the company’s market leader position in the personal auto space in Puerto Rico. The company continues to enhance its formalized ERM program, which includes, for example, revising risk assessment across the organization.

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 Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.

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Brian O’Larte

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Jim Peavy

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Source: AM Best