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AM Best Affirms Credit Ratings of Universal Insurance Company (Guernsey) Limited

AM Best has affirmed the Financial Strength Rating of B (Fair) and the Long-Term Issuer Credit Rating of “bb” (Fair) of Universal Insurance Company (Guernsey) Limited (UIC) (Guernsey). The outlook of these Credit Ratings (ratings) is negative.

The ratings reflect UIC’s balance sheet strength, which AM Best assesses as adequate, as well as its strong operating performance, very limited business profile and marginal enterprise risk management (ERM).

The negative outlooks reflect pressures on UIC’s creditworthiness driven by the uncertainty in its strategic direction as its ultimate parent, Universal Holdings (Guernsey) Limited (UHL), restructures its operations, which led to elevated financial leverage for the group at the end of 2023.

UIC’s balance sheet strength is underpinned by its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), which has returned to the strongest level at the fiscal year-end 30 June 2023. AM Best expects UIC’s BCAR scores to remain comfortably in excess of the minimum required for the strongest assessment, with good internal capital generation strengthening its capital base, which significantly reduced following the payment of a GBP 8 million extraordinary dividend in July 2022 to UHL. A partially offsetting factor is UIC’s very small capital base of GBP 3.2 million at fiscal year-end 30 June 2023, which heightens the sensitivity of its balance sheet strength to any shocks. UIC’s balance sheet strength assessment also considers the negative impact of its holding company, UHL, which has elevated financial leverage.

Since its creation in 2014, UIC has achieved strong operating profitability. The company has reported a five-year (2019-2023) weighted average return-on-equity ratio of 32.4%. Earnings are derived primarily from excellent underwriting profitability, reflected in a five-year weighted average combined ratio of 21.3%, whilst the conservative and highly liquid investment portfolio produces modest albeit stable returns.

UIC’s underwriting book of business is highly concentrated, as it writes only ancillary motor business in a single territory. In addition, AM Best views UIC’s business model to be vulnerable to potential changes in the U.K. retail motor market.

AM Best considers UIC’s ERM framework to be evolving. The marginal ERM assessment factors in the elevated risk profile stemming from UIC’s business model, which encompasses significant concentration risk.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit

Copyright © 2024 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.


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