Best’s News & Research Service - July 07, 2023 09:09 AM (EDT)
AM Best Revises Outlooks to Stable for Universal Insurance Company; Affirms Credit Ratings of Universal Life Insurance Company
- July 07, 2023 09:09 AM (EDT)
Oldwick //BestWire// - AM Best has revised the outlooks to stable from negative and affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” (Excellent) of Universal Insurance Company (UIC). At the same time, AM Best has affirmed the FSR of B+ (Good) and the Long-Term ICR of “bbb-” (Good) of Universal Life Insurance Company (ULICO). The outlook of these Credit Ratings (ratings) is negative. Both companies are domiciled in Guaynabo, PR.
The ratings reflect UIC’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and marginal enterprise risk management (ERM).
The revision of the outlooks from negative to stable for UIC’s ratings reflects AM Best’s view that ULICO’s reinsurance exposure to Private Bankers Life & Annuity (PBLA), although not resolved completely, has a diminished consequence to UIC’s business profile from reputational risk.
UIC’s balance sheet strength is supported by its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), generally stable loss reserving trends in recent years, favorable liquidity measures enhanced by positive operating cash flows, a conservative and well-diversified investment portfolio and a comprehensive reinsurance program that protects surplus from catastrophe events. However, surplus growth has been tempered by stockholder dividends and UIC maintains elevated ceded leverage measures. The group has reported favorable operating return measures that compare favorably with its composite average, driven by solid underwriting earnings and consistent investment income. UIC’s business profile reflects its market position as a top writer in Puerto Rico. The ERM program continues to be strengthened across the organization.
The ratings of ULICO reflect its balance sheet strength, which AM Best assesses as adequate, as well as its strong operating performance, limited business profile and marginal ERM.
ULICO’s outlook remains negative, as AM Best still has concern over the valuation and monetization of assets held in trust for ULICO’s benefit. ULICO continues to take steps to limit the effect of the counterparty risk and is continuing legal and transactional actions to recapture the trust assets that are backing reserve credits. Exposure to PBLA has decreased and ULICO has monetized over $70 million over the last 12 months and improved collateral of reserve credits. While ULICO has recaptured a modest amount of assets to date, significant assets remain, and AM Best will continue to monitor such efforts as they proceed.
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 Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.