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
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 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 www.ambest.com/ratings/methodology.
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Assistant Vice President
Senior Manager, Public Relations
Assistant Vice President, Public Relations