OLDWICK: AM Best has revised the outlook to negative from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating of B (Fair) and the Long-Term ICR of “bb+” of The Order of United Commercial Travelers of America (UCT).

The outlook of the FSR remains stable.

The Credit Ratings reflect UCT’s balance sheet strength, which AM Best categorizes as strong, as well as its weak operating performance, limited business profile and marginal enterprise risk management (ERM).

The negative Long-Term ICR outlook reflects a decline in direct premiums written, negatively trending net income, a deteriorating business profile and modestly declining surplus through Sept. 30, 2019. AM Best also notes that the company maintains an overall small absolute level of capital, which together with its limited financial flexibility and lack of diversification has the potential to magnify the impact of unfavorable operating trends on risk-adjusted capitalization.

Additionally, the company maintains modest market positions in a highly competitive accident & health segment in which many of its competitors enjoy significant scale advantages, which limits UCT’s business profile.

Partially offsetting rating factors include UCT’s currently favorable level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), in support of its insurance and investment risks due to a conservative investment portfolio and the extensive use of reinsurance.

AM Best also notes that UCT has implemented an insurance oversight board to manage its strategic planning, mitigate risks and provide industry expertise. While the company has made strategic business shifts in products and distribution, the full impact has yet to be realized.