Press Release - JUNE 04, 2019
AM Best Affirms Credit Ratings of Union Insurance Company Limited
FOR IMMEDIATE RELEASE
OLDWICK - JUNE 04, 2019
The ratings reflect Union’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The company continues to maintain a robust level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). Its capitalization was strengthened further in 2018 on a combined result of reduced equity market risk, and increased capital and surplus from continued earnings retention. The insurer’s highly liquid investment portfolio, prudent reinsurance arrangements, debt-free balance sheet and additional financial flexibility as a publicly traded company also contribute to its very strong level of balance sheet strength.
Union extended its profitability trend in operating results in 2018. Improved underwriting results in the personal voluntary motor line helped offset higher combined ratios in the commercial fire and personal accident lines. Although yields remained low, income from Union’s investment portfolio and property holdings have continued to supplement the company’s positive investment results over the past five years.
Union continued to hold the sixth-largest market share in 2018; this improved slightly in spite of growing industry competition. While the underwriting portfolio comprised a proportion of personal voluntary motor that is higher than average, the company continued to strengthen its distribution partnerships and expand its commercial product revenue, such as commercial fire, engineering and liability.
Partially offsetting rating factors include the ongoing intense market competition and potential volatility in underwriting results due to assumed risks that are located predominantly in a catastrophe-prone area. Compared with its premium base, the company’s compulsory motor special reserves accounted for a proportion that was lower than the industry average; this could pose a negative impact on the company’s operating performance, should there be a shortfall in reserves.
Union’s credit profile is well-supportive of the current ratings and the likelihood of positive rating actions is small over the short to intermediate term. Negative rating actions could occur if the company experiences a trend of significant and sustained deterioration in its operating performance, or if there is a significant decline in risk-adjusted capitalization.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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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