AM Best Upgrades Credit Rating of Illinois’ American Heartland Insurance

October 10, 2019

AM Best has upgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “ccc-” from “cc” and affirmed the Financial Strength Rating (FSR) of C- (Weak) of American Heartland Insurance Co. (American Heartland) in Skokie, Illinois.

Concurrently, AM Best has affirmed the FSR of C++ (Marginal) and the Long-Term ICR of “b” of United Equitable Insurance Co. (United Equitable), its separately rated affiliate that is also located in Skokie.

The outlook of these ratings remains stable.

The ratings of American Heartland reflect its balance sheet strength, which AM Best categorizes as very weak, as well as its adequate operating performance, limited business profile and marginal enterprise risk management (ERM).

The ratings of United Equitable reflect its balance sheet strength, which AM Best categorizes as weak, as well as its adequate operating performance, limited business profile and marginal ERM.

The Long-Term ICR upgrade reflects American Heartland’s recent improvement in risk-adjusted capitalization and key underwriting leverage measures, while maintaining low volatility in combined and operating ratios.

Additionally, recent growth in policyholders’ surplus contributed to a five-year compound annual growth rate of 4.6%, while the ratios of loss reserves to policyholders’ surplus and loss reserves to net premiums earned each reached five-year lows.

Cumulatively, these factors contributed to the improved baseline Long-Term ICR corresponding to the very weak balance sheet strength assessment.

United Equitable’s rating affirmations reflect the relative stability of its weak risk-adjusted capitalization and balance sheet strength, as well as the continued stability of key metrics of operating performance that align with an adequate operating performance assessment, such as its five-year average operating ratio, pre-tax return on revenue and total return on surplus.

Source: AM Best

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