Best’s News & Research Service - December 16, 2015 12:38 PM (EST)
A.M. Best Downgrades Ratings of National Unity Insurance Company
Oldwick //BestWire// - A.M. Best has downgraded the financial strength rating to B+ (Good) from B++ (Good) and the issuer credit rating to “bbb-” from “bbb” for National Unity Insurance Company (National Unity) (San Antonio, TX). The outlook for both ratings is negative.
The downgrade of the rating follows the reporting of third quarter results which included a decline in surplus, sizeable net underwriting losses and adverse reserve development. These results are primarily due to the company’s domestic non-standard auto book of business. National Unity’s results started to deteriorate in 2014 and have significantly worsened through Sept. 30, 2015. Management has terminated several of the managing general agents that were producing the business and premium volume and policies in-force have rapidly declined through the year. However, inadequate pricing, poor claims handling and inadequate reserving have resulted in adverse operating results, sizeable underwriting losses and an elevated combined ratio.
The negative outlook reflects A.M. Best’s opinion that adverse operating results will continue and have a further drain on overall risk-adjusted capitalization.
National Unity maintains fair capitalization for its current rating and historically favorable operating performance. This was accomplished through management’s expertise in its niche product of cross border, low limit and short duration policies. This product continues to produce excellent results. Overall, the company’s five-year results are favorable and outperform the private non-standard auto industry composite in several key financial measures. Deterioration in operating results and overall risk-adjusted capitalization began with the rapid premium expansion in domestic non-standard auto policies and entrance into states where they had no operational experience. As a result, underwriting leverage measures sharply increased, surplus deteriorated and overall risk-adjusted capitalization declined.
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