AM Best has upgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to "bb+" from "bb" and affirmed the Financial Strength Rating (FSR) of B (Fair) of Liberty Union Life Assurance Company (Liberty Union Life) (Troy, MI). The outlook of the Long-Term ICR has been revised to stable from positive, while the outlook of the FSR remains stable.
The Credit Ratings (ratings) reflect Liberty Union Life’s balance sheet strength, which AM Best categorizes as strong, as well as its marginal operating performance, limited business profile and marginal enterprise risk management.
The upgrade of the Long-Term ICR reflects Liberty Union Life’s strengthened risk-adjusted capitalization over the past two years, driven by a sizable release of excess reserves in 2018 that increased the company’s absolute capital and surplus materially, as well as its Best’s Capital Adequacy Ratio (BCAR). However, AM Best notes the company’s relatively modest level of absolute capital and surplus, as well as its limited financial flexibility.
Liberty Union Life’s overall operating performance has been unfavorable in recent years. Net premiums had been on a downward trend through 2018, driven by terminations of medical stop-loss business due to rate increases and the runoff of its closed major medical and mini-med segments. The company reported net premium growth in 2019, as a result of new medical stop-loss sales in the Midwest, outside of Michigan. Liberty Union
Life has reported a trend of underwriting losses, which has contributed to nominal operating gains and net income during this period, as well as modest operating and net losses in 2017. The operating gain reported in 2018 was driven by the reserve release. Furthermore, its return on equity and return on revenue metrics have been below industry averages.
Liberty Union Life continues to be challenged by a limited business profile, reflecting its nominal market share within its operating area, a business concentration in its small group medical stop-loss product and geographic concentration in Michigan, as well as highly competitive medical stop-loss and supplemental accident and health markets, which include larger national and regional health carriers.
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