News Column

A.M. Best Downgrades Ratings of National Unity Insurance Company

May 8, 2014

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Besthas downgraded the financial strength rating to B++ (Good) from A- (Excellent) and the issuer credit rating to “bbb+” from “a-” of National Unity Insurance Company (National Unity) (San Antonio, TX). The outlook for both ratings has been revised to stable from positive.

The rating downgrades reflect National Unity’s significant decline in risk-adjusted capitalization due primarily to aggressive premium growth in its domestic non-standard automobile liability product in 2012, and to a larger extent in 2013. The rapid growth also has resulted in increased overall liabilities; higher loss and loss-adjusted expenses; and elevated underwriting leverage measures. In response to the aggressive growth, the company’s stockholders made a cash contribution of $2 million in the second quarter of 2014.

These negative rating factors are partially offset by National Unity’s historical pattern of surplus growth as well as its favorable operating performance trend despite increased exposure in recent years. National Unity has reported net income earnings in each of the last five years through 2013, primarily driven by positive net underwriting income and a steady stream of solid net investment income. National Unity is a market leader in providing short-term (1-14 days) auto liability coverage to non-resident Mexican tourists driving in the United States. Management’s comprehensive knowledge of the Mexican insurance market and its strong relationship with local producers contribute to its favorable operating results. However, the new growth is primarily domestic non-standard minimal limit auto business with mostly six-month policies. Although this business is short tailed and has minimal limits, it will produce significantly more losses than the non-resident policies. As a result, losses and loss adjustment expenses are expected to increase.

The ratings may be downgraded if National Unity’s risk-adjusted capitalization continues to decline and/or there is a significant deterioration in its operating performance. Positive rating actions are contingent upon the continuation of National Unity’s favorable operating performance and surplus growth while improving overall capitalization and underwriting leverages.

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

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit

Copyright © 2014 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.

A.M. Best Company

Najam Sharif, 908-439-2200, ext. 5326

Financial Analyst


Joseph Burtone, 908-439-2200, ext. 5125

Assistant Vice President


Rachelle Morrow, 908-439-2200, ext. 5378

Senior Manager, Public Relations


Jim Peavy, (908) 439-2200, ext. 5644

Assistant Vice President, Public Relations

Source: A.M. Best Company

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Source: Business Wire