OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has downgraded the Financial Strength Rating (FSR) to B+ (Good) from B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb-” (Good) from “bbb+” (Good) of Unified Life Insurance Company (Unified Life) (headquartered in Overland Park, KS). Concurrently, AM Best has maintained the under review with negative implications status for these Credit Ratings (ratings).
The ratings reflect Unified Life’s balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and marginal enterprise risk management (ERM).
The ratings downgrade is attributed to a deterioration in United Life’s risk-adjusted capitalization from a very strong level in 2019 to a strong level in 2020, as measured by Best’s Capital Adequacy Ratio (BCAR). The lower BCAR assessment was driven by a significant increase in net premium in 2020 from sales of its now discontinued hospital indemnity wellness product that added surplus strain, as well as an increase in higher risk investments, which resulted in a higher capital requirement. Furthermore, both risk-adjusted capitalization and Unified Life’s absolute capital and surplus deteriorated in the first quarter of 2021, driven by the recording of a reserve for a litigation settlement related to its now discontinued short-term health product.
The ratings downgrade is also attributed to AM Best’s revised assessment of Unified Life’s ERM. In recent years, unanticipated regulatory, market and operational risks have negatively impacted the company’s balance sheet strength from its formerly marketed short-term health, Medicare Supplement and hospital indemnity wellness products. Each of these product endeavors resulted in the company withdrawing from the respective product market.
The ratings will remain under review pending AM Best's further discussions with management regarding Unified Life's plan to improve the company's capital position in the near term.
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