Fitch Affirms The Doctors Company Group's Ratings; Outlook Stable

CHICAGO--(BUSINESS WIRE)--Fitch Ratings has affirmed the 'A' Insurer Financial Strength (IFS) ratings on The Doctors Company, an Intercompany Insurance Exchange (Doctors) and its wholly owned insurance subsidiaries, see list below, collectively referred to as The Doctors Company Group (TDC). The Rating Outlook for all ratings is Stable.

TDC's ratings are based on above-average underwriting performance and profitability relative to medical malpractice insurer peers, adequate loss reserve levels, adequate statutory capital position, and a highly experienced management team that employs a conservative operating strategy that is focused on long-term underwriting profitability.

The rating also considers that TDC is essentially a mono-line insurer operating in one of the more volatile segments of the property/casualty insurance industry. Market conditions in recent years were favorably impacted by legislative reforms, a drop in claims frequency, and market exits from underperforming competitors. While Fitch does not anticipate a precipitous drop in underwriting results for the medical malpractice industry, Fitch believes that a softening of rates will put downward pressure on results.

Fitch also notes that while TDC's acquisition of SCPIE Holdings (SCPIE) last year is still in its infancy, the integration is in line with management and rating category expectations. Fitch believes that TDC is in a good position to leverage potential synergies from SCPIE due to the significant overlap in the companies' geographical footprints and operating profiles.

TDC reported a very strong statutory calendar year combined ratio of 68.9% for 2008. Adjusting for the favorable reserve development, the statutory accident year combined ratio was still strong at 83.5% for 2008. Despite the strong operating results Fitch notes that statutory surplus dropped approximately 2% to $821 million at year end 2008. In particular, Fitch notes the $129 million in realized losses coupled with the negative $68 million change in unrealized losses exceeded underwriting income.

TDC's investment portfolio has an equity allocation of approximately 20% which is about 5-10 percentage points higher than the industry average. Additionally, the company does have a small allocation to mortgage loans and alternative investments. TDC's exposure to these asset classes expose the company to above average risk given the current economic environment. If investment results deteriorate further, despite strong underwriting results, Fitch may lower the current ratings.

Doctors is a California domiciled reciprocal insurer with operating subsidiaries engaged in medical malpractice insurance. The company ranks among the top five U.S. writers of medical malpractice insurance.

Founded in 1976, California-based TDC insures over 45,000 physicians and is endorsed by numerous medical societies. As of Dec. 31, 2008, TDC reported $517 million of net premiums written, and policyholder surplus of $821 million. TDC is licensed as an admitted carrier in 48 states, the District of Columbia, and the Territory of Guam.

Fitch has affirmed the 'A' IFS ratings of the following TDC insurance subsidiaries:

--The Doctors' Company, an Intercompany Insurance Exchange

--Professional Underwriters Liability Insurance Company (PULIC)

--Underwriter for the Professions Insurance Company (UPIC)

--Northwest Physicians Insurance Company (NPIC)

--OHIC Insurance Company (OHIC)

Fitch has assigned an 'A' IFS rating to the following TDC insurance subsidiary:

--SCPIE Indemnity Company

The Rating Outlook for all ratings is Stable.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.