OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has removed from under review with negative implications and affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of “a-” of Allied Professionals Insurance Company, A Risk Retention Group, Inc. (APIC) (Scottsdale, AZ). The outlook assigned to the ratings is negative.
The rating actions follow the completion of the company’s plans to strengthen its balance sheet and the implementation of various strategic initiatives to improve underwriting and operating performance and reduce its exposure to chiropractic claims. Approximately $6 million has been raised over the past 12 months through capital contributions and the issuance of a surplus note. In addition, reserves have been strengthened and the reinsurance program was revised to enhance the capacity of the balance sheet. Furthermore, several actions on the chiropractic book were taken, including but not limited to rate increases, limiting discounts, and establishing a binding authority with the Lloyd’s market to rebalance risk in the portfolio and limit growth.
The assignment of a negative outlook reflects A.M. Best’s concerns regarding the uncertainty of the long-term benefits that these initiatives will have on improving operating performance, which had deteriorated in recent years. Since late 2012, APIC has experienced an increase in claim frequency and severity. This adverse loss experience negatively impacted reserve development and eroded a portion of the company’s surplus position. Although capitalization is supportive of the ratings, further unfavorable operating performance due to initiatives falling short of expectations or continued adverse development on the chiropractic book may cause weakening and put additional pressure on the ratings.
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