OLDWICK, N.J.–(BUSINESS WIRE)–AM Best has upgraded the Financial Strength Rating (FSR) to C (Weak) from C- (Weak) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “ccc+” (Weak) from “ccc-” (Weak) of American Heartland Insurance Company (American Heartland). The outlook of the FSR is stable, while the outlook of Long-Term ICR is negative. Concurrently, AM Best has downgraded the FSR to C (Weak) from C++ (Marginal) and the Long-Term ICR to “ccc+” (Weak) from “b” (Marginal) of United Equitable Insurance Company (United Equitable). The outlook of the FSR has been revised to stable from negative, while the outlook of the Long-Term ICR is negative. Both companies are domiciled in Morton Grove, IL. Historically, AM Best has maintained separate Credit Ratings (ratings) for American Heartland and United Equitable; however, based on the level of integration and commonalities between the two entities, which benefit from explicit support by a common parent, United Equitable Group, Ltd., AM Best now analyzes the companies on a consolidated basis. Collectively they are referred to as United Equitable Insurance Group or UEIG.
The ratings of UEIG reflect its balance sheet strength, which AM Best assesses as very weak, as well as its adequate operating performance, limited business profile and marginal enterprise risk management (ERM).
The group’s very weak balance sheet strength assessment is reflective of its weak overall risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio (BCAR), and its significantly elevated underwriting leverage measures in relation to the private passenger non-standard auto composite. The negative outlooks on the Long-Term ICRs for UEIG are based on continued pressure on the group’s balance sheet strength assessment driven by significant recent growth and continued elevated underwriting and reserve leverages.
UEIG’s adequate operating performance assessment reflects combined ratios that compare favorably to the composite. These results are mainly due to the group’s pure loss ratio. However, this is somewhat offset by UEIG’s elevated underwriting expense ratio driven by commission costs that compare unfavorably to the composite.
UEIG’s limited business profile and marginal ERM assessments reflect the narrow product offering and geographic concentration of risk with nearly all of its business written in Illinois, which exposes the group to potential judicial, regulatory and economic concerns. Although still evolving, the ERM framework continues to be enhanced with a more formalized structure integrated into its process by management. However, uncertainty and execution risks remain due to UEIG’s aggressive growth and elevated leverage position. The stable outlooks on the FSRs reflect the expectation that risk-adjusted capitalization will be maintained at an acceptable level as measured by BCAR to support the balance sheet strength assessment and near-term business plan.
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.
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