OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has downgraded the financial strength rating to B- (Fair) from B+ (Good) and the issuer credit rating to “bb-” from “bbb-” for National Unity Insurance Company (National Unity) (San Antonio, TX). The outlook for each rating remains negative. Concurrently, A.M. Best has withdrawn the ratings following the company’s request to no longer participate in A.M. Best’s interactive rating process.
The downgrade stems from the continued unfavorable results in the company’s domestic non-standard auto book of business, which has resulted in lower overall risk-adjusted capitalization and significant adverse reserve development. The deterioration of results began in 2014, and further worsened in 2015. Large pre-tax operating losses have led to a material decline in risk-adjusted capitalization. In response, management has terminated several managing general agents to rapidly reduce premium levels in 2015. However, inadequate pricing, poor claims handling and inadequate reserving have resulted in worse than projected financials.
The continuation of the negative outlook reflects A.M. Best’s opinion that adverse operating results will continue and may further deteriorate risk-adjusted capitalization.
Prior to the National Unity’s entrance into the domestic non-standard auto book of business, the company accomplished profitable results through a niche product of cross border business. That product continues to produce favorable results, although it is overshadowed by losses in the domestic non-standard auto business. The decline in policyholders’ surplus has increased underwriting leverage ratios to distressed levels.
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