OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has revised the outlook to stable from negative for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term ICR of “bbb+” of United Heritage Life Insurance Company (UHLIC) (Meridian, ID). The outlook of the FSR remains stable.
The ratings reflect UHLIC’s balance sheet strength, which AM Best categorizes as strong, as well as its adequate operating performance, neutral business profile and marginal enterprise risk management (ERM). UHLIC is primarily an individual life insurance and annuity provider licensed in 49 states, with the majority of premiums deriving from the central and western United States.
The revision of UHLIC’s Long-Term ICR outlook to stable from negative reflects the clarity surrounding the potential liability to UHLIC and its parent, United Heritage Financial Group, Inc. (UHFG), from the liquidation order of Merced Property & Casualty Company (Merced), a former property/casualty affiliate, after claims from the California Camp Fire exceeded Merced’s assets, surplus and catastrophe reinsurance protection. UHFG’s management, general counsel and the California Department of Insurance have expressed that no liability from the event exists in relation to UHLIC or UHFG.
UHLIC’s balance sheet strength is supported by the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio, but is offset by the relatively high allocation to lower credit quality assets. Operating performance for the entity is adequate, with the most recent full year results producing record net income and a double-digit return on equity for the first time since 2014. UHLIC’s business profile remains neutral with moderate product and geographic diversification offset by significant competition from larger players. Despite improvements in the organization’s overall ERM framework, which included the hiring of a chief risk officer, AM Best’s ERM assessment of marginal is due to concerns over prior insufficiently modeled catastrophe exposures at Merced, a former property/casualty affiliate. AM Best expects the organization to continue improving its ERM framework and demonstrate its effectiveness over time.
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