OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has removed from under review with negative implications and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a” of Preferred Physicians Medical Risk Retention Group, a Mutual Insurance Company (PPM RRG) (Kansas City, MO). The outlook assigned to these Credit Ratings (ratings) is negative. Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and the Long-Term ICRs of “a” for the members of NORCAL Group (NORCAL or the group). The outlook of these ratings remains negative. (Please see below for a detailed listing of the companies.)
The ratings of NORCAL reflect the group’s supportive balance sheet strength, as evidenced by its strong risk-adjusted capitalization, sound liquidity and low underwriting leverage, and historically profitable operating performance. In addition, the group’s reserves have been redundant year after year. The ratings also recognize NORCAL’s proactive risk management and leadership position as one of the largest providers of medical professional liability (MPL) insurance in the United States based on direct premium written. The group is well-recognized for its admitted and excess and surplus lines businesses.
The rating outlooks are negative due to erosion of underwriting performance, primarily in 2013 and 2014, and a steady decline in written premium. This has raised concerns about future performance as the group’s underwriting is concentrated in MPL lines, which are experiencing a soft market pricing and changing market dynamics.
The ratings of PPM RRG have been removed from under review with negative implications and the risk retention group (RRG) has been assigned the ratings of NORCAL Mutual Insurance Company (NORCAL Mutual), the lead company of the NORCAL Group. NORCAL Mutual acquired PPM RRG’s attorney-in-fact, PPM Services, Inc., on Jan. 1, 2017. As a result of this transaction, NORCAL obtained effective control of the RRG and immediately implemented a 100% quota share reinsurance agreement and loss portfolio transfer agreement from the RRG to NORCAL Mutual.
The acquisition of PPM RRG is viewed positively by A.M. Best. The RRG has been very profitable, and its addition to the group should help to further improve NORCAL’s underwriting performance and reverse the declining premium trend. However, the rating outlooks will remain negative until a more prolonged improvement period can be observed.
The FSR of A (Excellent) and the Long-Term ICRs of “a” have been affirmed for following members of the NORCAL Group:
- NORCAL Mutual Insurance Company
- NORCAL Specialty Insurance Company
- Medicus Insurance Company
- FD Insurance Company
The FSR of A (Excellent) and the Long-Term ICR of “a” has been removed from under review and affirmed for the following member of the NORCAL Group:
- Preferred Physicians Medical Risk Retention Group, a Mutual Insurance Company
This press release relates to Credit Ratings 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 see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
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