OLDWICK, N.J.–(BUSINESS WIRE)–AM Best has removed from under review with negative implications and downgraded the Financial Strength Rating to B (Fair) from A- (Excellent) and the Long-Term Issuer Credit Ratings to “bb” from “a-” of United Insurance Company (UIC) (Cayman Islands) and its subsidiary, United Re (Europe) S.A. (United Re) (Luxembourg). The outlook assigned to these Credit Ratings (ratings) is negative. Concurrently, AM Best has withdrawn the ratings of UIC and United Re at the company’s request to no longer participate in AM Best’s interactive rating process.
AM Best placed the ratings under review with negative implications in August 2019, following UIC’s disclosure that as part of an affiliated transaction, it provided a cash deposit that materially weakened its balance sheet strength and liquidity. The cash deposit was repaid to UIC in October 2019.
The ratings reflect UIC’s balance sheet strength, which AM Best categorizes as weak, as well as its adequate operating performance, neutral business profile and marginal enterprise risk management.
UIC’s risk-adjusted capitalization has been impacted negatively by significant growth, operating losses and an increase in investment risk. Additionally, in 2019 the group received an affiliated surplus note, which has limited its risk-adjusted capital and liquidity position. The group’s balance sheet strength at year-end 2019 is projected to improve due to the monetization of an affiliated recoverable, maintenance of lower risk invested assets, a stabilization in new business growth and a significant improvement in operating performance.
The group’s operating performance over the past five years has been volatile, and recently, the group incurred increased losses and related expenses on its new third-party business. Investment returns have been variable over the past five years and have trended lower.
UIC’s risk management framework and management’s capabilities relative to its risk profile have been strained. UIC recently has taken actions to limit its underwriting losses and investment risk, by non-renewing underperforming business and liquidating its main investment fund. AM Best remains concerned with the level of material affiliated transactions and lack of timely communication of such transactions.
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.
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Darian Ryan, CPA
Senior Financial Analyst
+1 908 439 2200, ext. 5449
Steven M. Chirico, CPA
+1 908 439 2200, ext. 5087
Manager, Public Relations
+1 908 439 2200, ext. 5159
Director, Public Relations
+1 908 439 2200, ext. 5644