AM Best has downgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “cc” (Very Weak) from “ccc- “(Weak) and affirmed the Financial Strength Rating (FSR) of C- (Weak) of United Security Assurance Company of Pennsylvania (USAP). The outlook of these Credit Ratings (ratings) has been revised to negative from stable.

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

The downgrade of the Long-Term ICR reflects a decline in USAP’s risk-adjusted capitalization in 2025, as measured by Best’s Capital Adequacy Ratio (BCAR), to a very weak level from an adequate level in the prior year due to a net loss driven by higher claims and an increase to claim reserves.

USAP depends on reinsurance leverage as it cedes a sizable portion of long-term care (LTC) risk to Vista Life & Casualty Reinsurance Company’s Incorporated Protected Cell 1.16 (ViUS PC-2016-A IC, Inc.) or Cell 1.16. Unrated Cell 1.16 is an unauthorized reinsurer posing potential counterparty risk. Furthermore, parent company, CMS Financial Services Corp., is unable to provide financial support to USAP based on its reported stockholders’ equity deficit position and elevated debt leverage.

USAP suspended writing new business in 2020 per an agreement with the Pennsylvania Insurance Department until the Cell 1.16 investment holdings can be liquidated and are moved to more traditional investments. The lack of new written business has caused net premiums written to trend downward over the past five years, with net underwriting losses reported driven by increases to claims and claim reserves.

USAP’s business is concentrated in LTC products, which comprise over 95% of total in-force premium. Additionally, over one-half of direct premiums written are generated from five states. AM Best notes that LTC products are the riskiest products on AM Best’s product risk continuum, thereby posing high product 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 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.

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