OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has upgraded the issuer credit ratings (ICR) to “a+” from “a” and affirmed the financial strength rating of A (Excellent) of Medical Mutual Insurance Company of North Carolina (Medical Mutual) and its wholly owned subsidiary, Medical Security Insurance Company (Medical Security). Both companies are domiciled in Raleigh, NC. The outlook for the ICR of Medical Mutual has been revised to stable from positive, while the outlook on all other ratings remains stable.
The ratings reflect the companies’ excellent balance sheet strength, long-term favorable operating performance and leadership position in its core markets. The strength of the balance sheet is evidenced by the companies’ strong risk-adjusted capitalization, modest underwriting leverage, excellent liquidity and conservative reserving. The balance sheet has been supported by positive earnings, mainly from favorable underwriting performance and realized capital gains, which supports net investment income. Underwriting results have benefited from favorable reserve development on prior accident year claims, sound risk management practices and from prudent expense management, which has resulted in below average expense ratios. The business profile is good as management has expertise in writing medical professional liability (MPL) coverage, and Medical Mutual is a leading provider of MPL insurance in its core markets. Medical Security also benefits from the implicit and explicit support provided by Medical Mutual through intercompany reinsurance, common management, common board members and synergies derived from its integration into Medical Mutual’s business plans, risk management and operations.
Partially offsetting these positive rating factors are the companies’ concentration of underwriting risk in MPL lines. This commercial lines market segment is characterized by soft pricing; strong competition; and potential volatility in underwriting results due to the long-tail nature of the claims. This segment is also subject to changing market dynamics with a trend of private practice physicians becoming employees of hospitals and larger physician groups; changes in healthcare delivery and continued challenges to tort reform. In addition, interest rates remain low challenging investment income growth. Furthermore, the ratings take into consideration a general concentration of underwriting risk in North Carolina and inherent execution risk in Medical Mutual’s plans to expand into new territories.
Positive rating movement may be considered should Medical Mutual continue to build risk-adjusted capital, while maintaining or improving its excellent operating performance or enhancing its business profile. Negative rating pressure could develop from a significant reduction in risk adjusted capitalization, should an unfavorable trend in operating performance develop or if there were a material diminution in Medical Mutual’s standing within its main markets.
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. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
- Rating Members of Insurance Groups
- Risk Management and the Rating Process for Insurance Companies
- Understanding BCAR for Property/Casualty Insurers
This press release relates to rating(s) that have been published on A.M. 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 visit A.M. Best’s Ratings & Criteria Center.
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