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 Concurrently, AM Best has withdrawn these Credit Ratings (ratings) as the company has requested to no longer participate in AM Best’s interactive rating process.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.
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