Best’s News & Research Service - November 01, 2018 09:05 AM (EDT)
A.M. Best Downgrades Credit Ratings of The Order of United Commercial Travelers of America
- November 01, 2018 09:05 AM (EDT)
Oldwick //BestWire// - A.M. Best has downgraded the Financial Strength Rating to B (Fair) from B+ (Good) and the Long-Term Issuer Credit Rating to “bb+” from “bbb-” of The Order of United Commercial Travelers of America (UCT) (Columbus, OH). The outlook of these Credit Ratings (rating) has been revised to stable from negative.
The ratings reflect UCT’s balance sheet strength, which A.M. Best categorizes as strong, as well as its weak operating performance, limited business profile and marginal enterprise risk management.
The downgrades reflect a decline in direct premiums written, negatively trending net income and modestly declining surplus through Sept. 30, 2018. A.M. Best also notes that the company maintains an overall small absolute level of capital, which together with its limited financial flexibility and lack of diversification has the potential to magnify the impact of unfavorable operating trends on risk-adjusted capitalization. Also noted is UCT’s limited business profile focused on two accident & health product lines. In addition, the company maintains modest market positions in a highly competitive accident & health segment in which many of its competitors enjoy significant scale advantages.
Partially offsetting ratings factors include UCT’s currently favorable level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), in support of its insurance and investment risks due to a conservative investment portfolio and the extensive use of reinsurance. A.M. Best also notes that UCT has been expanding its dental, vision and hearing lines of business recently as its previous primary product line, Medicare Supplement, becomes a smaller proportion of written premiums. While the company has made strategic business shifts in products and distribution, the full impact has yet to be realized.
This press release relates to Credit Ratings 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. 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 A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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