A.M. Best Co. has downgraded the financial strength rating to B (Fair) from B+ (Good) and issuer credit rating to “bb+” from “bbb-” of Ullico Casualty Company (Ullico Casualty) (headquartered in the District of Columbia), placing both ratings under review with negative implications.
These actions reflect the myriad of challenges brought on by the change in Ullico Casualty’s fronting partner, the recent change in leadership with the departure of its senior management team, the wind-down of its substantial non-core program business and the adverse reserve development associated with this business. The run off of Ullico Casualty’s non-core business also brings into question the potential for future adverse reserve development on this discontinued business and the additional collateral to support these reserves.
These actions stem from a notice of termination issued to Ullico Casualty by its fronting partner, Hudson Insurance Company, and the business uncertainties related to this event prior and subsequent to its effective termination. The rating actions also take into account any additional (collateral) costs and fees associated with its new fronting relationship with State National Insurance Company, Inc. (State National) (which had a fronting relationship with Ullico Casualty prior to Hudson Insurance Company), as well as any attrition caused by this change.
According to management, Ullico Casualty has fully executed agreements as of February 1, 2012 with its former fronting partner, State National. At the same time, management has received approval for its newly established risk purchasing group, which is being used to cover those states that require 90-day regulatory approvals for rates and forms. Ullico Casualty’s ratings will remain under review pending a meeting with management and resolution of these issues.
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. Key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; and “Rating Members of Insurance Groups.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, 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 © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.