Best’s News & Research Service - June 02, 2016 02:23 PM (EDT)
A.M. Best Removes From Under Review and Downgrades Ratings of United Security Assurance Company of Pennsylvania
- June 02, 2016 02:23 PM (EDT)
Oldwick //BestWire// - A.M. Best has removed from under review with negative implications and downgraded the financial strength rating to C- (Weak) from C (Weak) and the issuer credit rating to “cc” from “ccc+” of United Security Assurance Company of Pennsylvania (United Security) (Souderton, PA). The outlook assigned to each rating is negative.
The rating actions reflect A.M. Best’s concern with the material deterioration in capitalization at United Security through March 31, 2016. The company’s financials reflected a capital and surplus position of $2.3 million, a decline from the year-end 2015 surplus position of $3.2 million. Additionally, risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), has fallen significantly below A.M. Best’s expectations, and is not considered adequate to support the company’s investment and insurance risks. The declining trend was primarily driven by a net loss of $1.4 million, which was tied to continued unfavorable claims experience reported in the company’s acquired blocks of long-term care business. A.M. Best notes that the company’s surplus position has declined in excess of 50%, from $4.8 million, since the last rating action on Nov. 25, 2015, when the third quarter statutory filing was reviewed.
United Security’s management has indicated that the company has executed a proposal with a reinsurer for a coinsurance arrangement to enhance its risk-adjusted capitalization and is currently working to obtain regulatory approval. However, A.M. Best believes that given United Security’s adverse underwriting trend and significantly diminished absolute level of capital, the company will continue to be challenged to reverse its declining capital and surplus level and materially improve its risk-adjusted capitalization organically, if a plan is not fully executed in the near term.
This press release relates to rating(s) that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page.
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