AM Best has downgraded the Financial Strength Rating (FSR) to C++ (Marginal) from B+ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “b” (Marginal) from “bbb-” (Good) of United Heritage Property & Casualty Company (UHPC) (Meridian, ID). In addition, AM Best has downgraded the FSR to B (Fair) from B++ (Good) and the Long-Term ICR to “bb” (Fair) from “bbb” (Good) of Sublimity Insurance Company (SIC) (Sublimity, OR). AM Best also has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” (Excellent) of United Heritage Life Insurance Company (UHLIC) (Meridian, ID). The outlooks of these Credit Ratings (ratings) have been revised to negative from stable. These companies are operating subsidiaries of United Heritage Financial Group, Inc. (UHFG).
Lastly, AM Best has withdrawn the ratings of UHPC as UHFG has requested to no longer participate in AM Best’s interactive rating process.
The ratings of UHPC reflect its balance sheet strength, which AM Best assesses as weak, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management.
The ratings of SIC reflect its balance sheet strength, which AM Best assesses as adequate, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management.
The ratings of UHLIC reflect its balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The rating downgrades reflect weakening in UHPC’s and SIC’s balance sheet strength assessment due to a material decline in policyholder surplus at third-quarter 2023. UHPC and SIC have experienced significant increases in underwriting losses driven by higher frequency and severity on auto costs, along with higher repair costs due to inflation. UHFG announced on Oct. 24, 2023, a multipart strategic plan to address headwinds in its property/casualty (P/C) operations. This plan includes realigning the P/C products and business written between SIC and UHPC. As part of the strategic realignment, it is expected that the UHFG will realize significant expense synergies in its P/C business going forward. In conjunction with the group’s revised business strategy, AM Best has withdrawn the ratings of UHPC at UHFG’s request.
The negative outlooks reflect AM Best’s concerns with UHPC’s and SIC’s ability to recapitalize their balance sheets and effectively manage the headwinds in the personal auto marketplace, along with their concentrations of auto and property risks. The negative outlooks on UHLIC’s ratings reflect AM Best’s concerns with a significant decline in regulatory capital ratios in 2022 and the financial flexibility of the group as it supports expected capital shortfalls in the P/C business. AM Best will carefully monitor the execution of the group’s multipart strategic plan over the near term.
This press release relates to Credit Ratings that have been published on AM 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 see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
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