Press Release|Insurance

KBRA Affirms Rating for Unique Insurance Company, Downgrades Rating for Stonegate Insurance Company

25 Apr 2025   |   New York

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KBRA affirms the Insurance Financial Strength Rating (IFSR) of BBB- for Unique Insurance Company (UIC) and downgrades the IFSR of Stonegate Insurance Company (SIC) from BBB to BBB-. The Outlook remains Stable for both ratings.

Key Credit Considerations

The downgrade of SIC reflects the corporate restructuring on December 27, 2024, whereby SIC became a wholly owned subsidiary of UIC. This organizational change was affected to strengthen the capital position of UIC and resulted in the first Combined Statutory Statement (UIC (Combined)), allowing KBRA to change its rating approach from a standalone assessment on each company to a group assessment encompassing both companies.

The ratings reflect UIC (Combined)’s position as a core component of Resolute Global Partners’ (RGP) diversification strategy for the 1609 Fund (the Fund), its meaningful share of the US non-standard automobile market, and its conservative investment portfolio. UIC (Combined) has helped stabilize and meaningfully increase returns for the Fund since 2019. In 2024 UIC (Combined) ranked in the top 30 nationally and the top 5 in Illinois among non-standard auto writers. As of December 31, 2024, approximately two-thirds of the unaffiliated combined investment portfolio consisted of investment grade fixed income securities, cash and cash equivalents.

Balancing these strengths are historical adverse development, moderately weak risk-adjusted capitalization, continued poor underwriting results, concentrated earnings, and UIC (Combined)’s exposure to ongoing challenges facing the US private passenger auto industry. Over the past five years unfavorable prior year loss reserve development has weighed heavily on UIC (Combined)’s results. In 2024, UIC (Combined) reported favorable prior year reserve development, reflective of the many initiatives implemented in reserving and claims over the recent past. UIC (Combined)’s risk-based capital (RBC) ratio has trended downward since 2020 to below the company’s target level by the end of 2024. UIC (Combined) has reported combined ratios greater than 100% since 2021, with modest deterioration in 2024 despite multiple rate increases and enhanced underwriting on its book of business. KBRA expects a 12-24-month delay before the full effect of recent underwriting actions flow through to the financial statements. Nearly 70% of direct written premiums is from private passenger auto lines of business, with nearly half of UIC (Combined)’s direct written premium emanating from Illinois. Since 2022, all private passenger auto underwriters have taken multiple rate increases and withdrawn from unprofitable states to bring the industry’s 2024 combined ratio back under 100%. Despite the improvement, the US state regulatory processes for obtaining rate increases continues to challenge the industry to stay ahead of trends and address rate deficiencies in real time. Also, while claims frequency trends have stabilized post-pandemic, concerns persist around inflation, including higher costs related to tariffs, in addition to overall claims severity.

Rating Sensitivities

Profitable underwriting results, continued positive reserve development, risk-adjusted capitalization above target level, and implementation of a formal ERM program could result in positive rating action. Reduced support from RGP, continued poor underwriting results, material negative loss reserve development, deterioration in the quality of the investment portfolio, and/or adverse change in risk profile could result in a negative rating action.

To access ratings and relevant documents, click here.

Methodologies

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

Doc ID: 1009145

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