OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a+” 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. These companies are collectively referred to as the Medical Mutual Group (NC) (the group). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect the group’s strong risk-adjusted capitalization, long-term favorable operating performance and leadership position in its core markets. The positive rating factors are derived from the group’s balance sheet strength, which has been supported by above-average earnings produced through favorable underwriting performance and investment income. Underwriting results have benefited from favorable reserve development on prior accident year claims, sound risk management practices and prudent expense management. Further supporting the positive rating factors is the group’s demonstrated expertise within its marketplace, which along with its attention to high quality service, has led to high policyholder retention levels.
Partially offsetting these positive factors is the group’s concentration of underwriting risk in medical professional liability insurance, which exposes it to underwriting cycle changes and potential changes in frequency and severity trends, as well as regulatory and tort reform issues. This segment is currently characterized by soft pricing and strong competition, as well as shifting market dynamics such as changes in healthcare delivery and the continued growing trends toward consolidation and hospital employment of physicians. In response to these challenges, the group’s expansion efforts beyond its core of insuring physician practices and entry into new territories bring execution risk and uncertainty due to the highly competitive and dynamic nature of the segment.
The ratings of Medical Mutual are now extended to Medical Security due to the strong explicit and implicit support from the parent and Medical Security’s relative importance to the organization. This support includes a material quota share reinsurance contract to Medical Mutual, full integration with its parent, common management and board members and a capital contribution in 2013.
Negative rating action could result if risk-adjusted capitalization materially decreases as a result of an unfavorable trend developing in underwriting performance or diminution in the group’s business profile.
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