OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has revised the outlook to positive from stable and affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of Medical Assurance Company of Mississippi (MACM) (Ridgeland, MS).
The ratings of MACM are reflective of its strong risk-adjusted capitalization, conservative loss reserve position, sustainable expense advantage and dominant position in providing medical professional liability insurance for physicians within Mississippi. Additionally, the ratings recognize the company’s strengthened surplus position stemming from several consecutive years of strong operating performance.
These positive rating factors are partially offset by MACM’s inherent market risks associated with being a single state, monoline medical professional liability insurer, as they relate to legislative (tort) reform, regulatory challenges and loss cost trends. MACM also exhibits elevated common stock leverage.
The company has benefited from its conservative approach in booking loss reserves, which has enabled MACM to continue its mission of providing a long-term stable market for physicians in Mississippi. The company operates as a non-profit organization exempt from state taxes and not obligated to participate in the state’s guaranty fund, all while maintaining rate flexibility. Operating performance has been enhanced by significant rate increases put in place several years ago, implementation of strict underwriting guidelines, improved claim frequency trends and enactment of tort reform legislation in Mississippi in 2003. However, MACM remains exposed to the complete or partial overturn of the tort reform legislation by the Mississippi Supreme Court on constitutional grounds, as well as the potential for inconsistent awards by juries in the state.
A.M. Best’s revised outlook for MACM is based on its improved capitalization and sustained strong operating profitability under the relatively stable operating environment over the majority of the 10-year period. In recognition of its strong profitability over the last few years, MACM has issued premium refunds to physician policyholders of record. In addition, management has implemented base rate decreases, when warranted, since 2006.
The ratings for MACM could be upgraded as a result of continued favorable performance on both an underwriting and operating basis, and the consistent generation of surplus and maintenance of strong capitalization while prudently managing its business profile risks.
The ratings and/or outlook could be downgraded as a result of adverse underwriting performance due to significant claims and inadequate loss reserves, a change in the tort environment or legislative/judicial landscape or an investment loss, which could cause the level of capitalization to no longer support the ratings and/or outlook.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include:: “Risk Management and the Rating Process for Insurance Companies” and “Understanding BCAR for Property/Casualty Insurers.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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