AM Best has removed the under review with negative implications and affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) of Unified Life Insurance Company (Unified Life) (headquartered in Overland Park, KS). The outlook assigned to these Credit Ratings (ratings) is negative.
The ratings reflect Unified Life’s balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and marginal enterprise risk management (ERM).
The removal of the under review with negative implications status and assignment of negative outlooks reflect the uncertainty regarding Unified Life's ability to maintain its adequate balance sheet strength assessment, as measured by its Best’s Capital Adequacy Ratio (BCAR). A mitigating factor is the company's favorable trend of profitable operating performance. In recent years, unanticipated regulatory, market and operational risks have negatively impacted the company's balance sheet strength from its formerly marketed short-term health product, as well as its Medicare supplement and hospital indemnity wellness products.
Unified Life’s strong risk-adjusted capitalization as measured by BCAR at year-end 2020, had deteriorated in the first quarter of 2021 due to the recording of a reserve for a litigation settlement related to its now discontinued short-term health product. Additionally, the company witnessed a significant increase in premium in the prior year driven by its group hospital indemnity wellness product, which was subsequently discontinued three months after its market introduction. Lastly, the company had increased its exposure to higher risk investments. For these reasons and AM Best’s reassessment of Unified Life’s ERM program, AM Best placed the company’s ratings under review with negative implications in June 2021 and subsequently downgraded these ratings a month later.
Unified Life expects risk-adjusted capitalization to strengthen from the run-off of the majority of its closed hospital indemnity wellness product net premium by year-end 2021, which is expected to reduce capital strain. The company also expects a favorable net operating gain to contribute to an improved BCAR at that time.
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