A.M. Best Downgrades, Places Ratings of United Security Assurance Company of Pennsylvania Under Review with Negative Implicat...
December 19 2014 - 10:41AM
Business Wire
A.M. Best has downgraded the financial strength rating to
C++ (Marginal) from B- (Fair) and the issuer credit rating to “b+”
from “bb-” and placed the ratings under review with negative
implications for United Security Assurance Company of
Pennsylvania (United Security) (Souderton, PA).
The rating actions are a result of A.M. Best’s review of United
Security’s most recent regulatory statements in which the company
reported a substantial operating loss, causing a sharp decline in
absolute and risk-adjusted capitalization. The primary driver of
the decline was the continued unfavorable claims experience on
certain blocks of acquired long-term care (LTC) business. This
experience resulted in increases in claim reserves and is
consistent with recently published industry data regarding claims
experience and incidence rates of older-aged policyholders.
Although management is actively working to implement an improvement
plan, which includes the pursuit of material rate increases to help
improve operating performance in its acquired LTC business, A.M.
Best believes these actions will take time to have a meaningful
impact on future operating results. Additionally, the organization
continues to be encumbered by high financial leverage at its
parent, CMS Financial Services Corp.
In placing the company’s ratings under review with negative
implications, A.M. Best believes that given United Security’s
adverse underwriting results in its legacy LTC blocks, it will be
challenged to reverse declining capital and surplus trends and
improve risk-adjusted capitalization without a meaningful infusion
of capital. A.M. Best expects to meet with United Security's
management shortly to review alternatives to improve its
capitalization, after which A.M. Best expects to resolve the under
review status.
The methodology used in determining these ratings is Best’s
Credit Rating Methodology, which provides a comprehensive
explanation of A.M. Best’s rating process and contains the
different rating criteria employed in the rating process. Best’s
Credit Rating Methodology can be found at
www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
• A.M. Best's Liquidity Model for U.S. Life Insurers
• Analyzing Insurance Holding Company Liquidity
• Risk Management and the Rating Process for Insurance
Companies
• Understanding BCAR for U.S. and Canadian Life/Health
Insurers
• Insurance Holding Company and Debt Ratings
This press release relates to rating(s) that have been
published on A.M. Best's website. For all rating information
relating to the release and pertinent disclosures, including
details of the office responsible for issuing each of the
individual ratings referenced in this release, please visit A.M.
Best’s Ratings & Criteria Center.
A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2014 by A.M. Best Company,
Inc. ALL RIGHTS RESERVED.
A.M. BestKate Steffanelli, 908-439-2200, ext.
5063Senior Financial
Analystkathryn.steffanelli@ambest.comorAndrew Edelsberg,
908-439-2200, ext. 5182Vice
Presidentandrew.edelsberg@ambest.comorChristopher Sharkey,
908-439-2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorJim Peavy,
908-439-2200, ext. 5644Assistant Vice President, Public
Relationsjames.peavy@ambest.com