OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has revised the outlook to positive from stable and affirmed the financial strength rating of B++ (Good) and issuer credit rating of “bbb+” of Unified Life Insurance Company (Unified Life) (Dallas, TX).
The revised outlook reflects Unified Life’s continued profitability, effective acquisition-oriented strategy and the diversity of its net premiums written. Additionally, the company maintains a good level of risk-adjusted capital for its current level of policyholder liabilities and investment strategy, and it has demonstrated favorable operating profitability over the last several years. Positive pre-tax earnings reflect fluctuating net underwriting income, due primarily to its acquisition-oriented strategy; however, it is more than offset by the generation of a steady stream of net investment income. Unified Life has historically acquired companies and closed blocks of business and supplements that strategy with opportunistic joint venture partnerships. Through these relationships, Unified Life is able to further diversify its income stream and business profile and generate capital while taking a controlled level of risk. For 2013, about two-thirds of the company’s net premiums written were derived from acquisitions and nearly one-third from joint venture partnerships. Given the company’s strategy of acquiring blocks of business, A.M. Best anticipates some challenges in growing the top line as Unified Life focuses on highly competitive lines of business. The company’s acquired blocks of business are uniformly performing better than pricing.
Unified Life’s invested assets have provided a favorable stream of net investment income. A.M. Best observes that the company holds a material level of below investment grade securities relative to its total-adjusted capital of approximately 47% of total-adjusted capital, which is 6% of total assets as of year-end 2013. Approximately two-thirds of the below investment grade securities are in NAIC Class 3, and approximately 19% of the commercial mortgage-backed securities portfolio comprises the total of its NAIC Class 5 and 6 holdings. However, the company’s investment portfolio has demonstrated favorable and sustainable yields while reporting modest realized losses. A.M. Best will continue to closely monitor Unified Life’s investment activity for material impairments or writedowns.
Factors that could result in favorable rating actions for Unified Life include a continued sustainable increase in net premiums written and favorable operating results, as well as increased risk-adjusted capital trends and moderating exposure to higher risk assets. Factors that could lead to negative rating actions include deterioration in operating performance and/or investment losses resulting in diminished risk-adjusted capitalization levels.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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