A.M. Best reported it has both downgraded and withdrawn the ratings for National Unity Insurance Company (National Unity) in San Antonio, Texas.
National Unity specializes domestic non-standard auto business, as well as in insuring Mexican cars and commercial trucks traveling to the United States and Canada.
A.M. Best downgraded the company’s financial strength rating to B- (Fair) from B+ (Good) and the issuer credit rating to “bb-” from “bbb-.” Best assigned a negative outlook for each rating. The ratings agency concurrently withdrew National Unity’s ratings following the company’s request to no longer participate in A.M. Best’s interactive rating process.
National Unity’s ratings were previously downgraded by A.M. Best in December 2015. The negative outlook was also assigned at that time.
A.M. Best said the December 2015 downgrade follows a decline in surplus, sizeable net underwriting losses and adverse reserve development in the third quarter, primarily in the company’s domestic non-standard auto book of business.
On its website, National Unity still claims an “A-” rating from A.M. Best.
Best said 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.
Source: A.M. Best
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