AM Best Withdraws Credit Ratings of Journey Insurance Company

Rhea-AI Summary

AM Best has downgraded Journey Insurance Company's Financial Strength Rating to B++ (Good) from A- (Excellent) and the Long-Term Issuer Credit Rating to 'bbb+' (Good) from 'a-' (Excellent). The FSR outlook is now stable, while the Long-Term ICR outlook is negative. Factors contributing to this downgrade include volatile operating performance due to losses from Winter Storm Uri and slow premium growth. Journey's business model development has not met projections, leading to the cessation of new business writing. UIHC, Journey's majority owner, faces equity erosion due to catastrophe losses.

Positive

• Journey's balance sheet strength remains very strong.
• The FSR outlook has been revised to stable.

Negative

• Operating performance is volatile, resulting in a marginal assessment.
• Significant losses from Winter Storm Uri impacted 2021 results.
• Premium growth has been slower than expected.
• Journey has stopped writing new business, hindering growth potential.
• Negative Long-Term ICR outlook due to fluctuations in risk-adjusted capitalization.
• UIHC has experienced material equity erosion in recent years.

OLDWICK, N.J.--(BUSINESS WIRE)-- AM Best has downgraded the Financial Strength Rating (FSR) to B++ (Good) from A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb+” (Good) from “a-” (Excellent) of Journey Insurance Company (Journey) (St. Petersburg, FL). The outlook for the FSR has been revised to stable from negative. The outlook for the Long-Term ICR is negative. Concurrently, AM Best has withdrawn these Credit Ratings (ratings) as the company has requested to no longer participate in AM Best’s interactive rating process.

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

The ratings downgrade reflects volatile operating performance that aligns with the marginal assessment. In 2021, the company’s operating results were challenged by significant Winter Storm Uri losses coupled with current accident year loss reserve strengthening. Compounding the impact of these losses was slower than expected premium growth. The development of Journey’s communicated business model has not tracked with projections and management has ultimately made the decision to stop actively writing new business. Without the prospect of gaining scale, profit margins will be subdued.

The negative Long-Term ICR outlook reflects fluctuations in Journey’s consolidated risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR) at the holding company level. Journey is majority owned by United Insurance Holdings Corp. (UIHC) (NASDAQ: UIHC). The company’s overall balance sheet strength assessment includes an evaluation of the impact from the ultimate parent. UIHC has reported material equity erosion in recent years, primarily driven by catastrophe losses and secondary perils. Losses led to observed deterioration in risk-adjusted capitalization at the last rating review, which has since rebounded as the organization aggressively non-renewed books of business, reducing the required capital related to underwriting risk. While AM Best has observed improvement, the negative outlook remains as management continues to stabilize the consolidated group’s operating performance and curb further erosion of capital.

Journey was created in 2018 to take advantage of market opportunities within Florida, Texas and South Carolina, specifically regarding commercial property coverage. The company’s balance sheet strength assessment reflects the infusion of significant capital intended to support growth as it relates to underwriting, credit and investment risks. UIHC recently announced a proposed reorganization plan to consolidate Journey into its affiliate, American Coastal Insurance Company, with the latter being the surviving entity. It is anticipated that the capital held at Journey will be redistributed between the go-forward insurance entities within the organization.

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 specializing 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 www.ambest.com.

Copyright © 2022 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220414005857/en/

Chris Draghi

Associate Director

+1 908 439 2200, ext. 5043

chris.draghi@ambest.com

Christopher Sharkey

Manager, Public Relations

+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.com

Richard Attanasio

Senior Director

+1 908 439 2200, ext. 5432

richard.attanasio@ambest.com

Jim Peavy

Director, Communications

+1 908 439 2200, ext. 5644

james.peavy@ambest.com

Source: AM Best

FAQ

What ratings did AM Best assign to Journey Insurance Company?

AM Best downgraded Journey Insurance Company's Financial Strength Rating to B++ (Good) from A- (Excellent) and the Long-Term Issuer Credit Rating to 'bbb+' (Good) from 'a-' (Excellent).

Why did AM Best downgrade Journey Insurance Company's ratings?

The downgrade was due to volatile operating performance, significant losses from Winter Storm Uri, and slower than expected premium growth.

What is the outlook for Journey Insurance Company's ratings?

The outlook for the Financial Strength Rating is stable, while the outlook for the Long-Term Issuer Credit Rating is negative.

How has Journey Insurance Company's management responded to its business performance?

Management has decided to stop actively writing new business due to the company’s underperformance.

What impact do the ratings downgrade have on United Insurance Holdings Corp. (UIHC)?

The downgrade reflects UIHC's material equity erosion and its impact on Journey's balance sheet strength.