OLDWICK, NJ, February 09, 2024–(BUSINESS WIRE)–AM the best upgraded the Financial Strength Rating (FSR) to C (weak) from C- (weak) and the Long-term Issuer Credit Rating (Long-term ICR) to “ccc+” (weak) from “ccc-” (weak) of American Heartland Insurance Company (American Heartland). The FSR outlook is stable, while the Long-Term ICR outlook is negative. At the same time, AM Best has lowered the FSR to C (Weak) from C++ (Marginal) and the Long-Term ICR to “ccc+” (Weak) from “b” (Marginal) of United Equitable Insurance Company (United Equitable). FSR’s outlook has been revised to stable from negative, while PNC’s Long-Term outlook is negative. Both companies are headquartered in Morton Grove, IL. Historically, AM Best has maintained separate credit ratings (ratings) for American Heartland and United Equitable; however, based on the level of integration and commonalities between the two entities, which benefit from clear support from a common parent, United Equitable Group, Ltd., AM Best now analyzes the companies on a consolidated basis. Together they are called United Equitable Insurance Group or UEIG.
UEIG’s ratings reflect the strength of its balance sheet, which AM Best rates as very weak, as well as its adequate operating performance, limited business profile and marginal enterprise risk management (ERM).
The group’s very weak balance sheet strength rating reflects its overall weak risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio (BCAR), and its significantly elevated underwriting leverage measures relative to with the composite of non-standard private passenger vehicles. The negative outlook for Long-Term ICRs for UEIG is based on continued pressure on the group’s balance sheet strength rating driven by significant recent growth and continued increases in underwriting and reserve leverage.
Adequate assessment of UEIG’s operating performance reflects combined ratios that compare favorably with the composite. These results are mainly due to the loss ratio of the group. However, this is somewhat offset by UEIG’s increased underwriting expense ratio driven by commission costs that compare unfavorably with composite.
UEIG’s limited business profile and marginal ERM ratings reflect its narrow product offering and geographic concentration of risk with almost all of its business written in Illinois, which exposes the group to potential litigation, regulatory and economic concerns. Although still in development, the ERM framework continues to improve with a more formalized structure integrated into its process by management. However, uncertainty and execution risks remain due to UEIG’s aggressive growth and elevated leverage position. The stable outlook for FSRs reflects the expectation that risk-adjusted capitalization will be maintained at an acceptable level as measured by BCAR to support the assessment of balance sheet strength and the short-term business plan.
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