OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has upgraded the Financial Strength Rating (FSR) to A (Excellent) from A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) to “a” from “a-” of the wholly owned subsidiaries of Medical Professional Mutual Insurance Company (ProMutual) (Boston, MA): MHA Insurance Company (MHA) (East Lansing, MI), Washington Casualty Company (Washington Casualty) (Maple Valley, WA) and Preferred Professional Insurance Company (PPIC) (Omaha, NE). The outlook of the Credit Ratings (ratings) of MHA and Washington Casualty has been revised to stable from positive. The outlook of the ratings of PPIC remains stable.
Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and the Long-Term ICRs of “a” of ProMutual and its other wholly owned subsidiaries, ProSelect Insurance Company (Omaha, NE) and Coverys Specialty Insurance Company (Morristown, NJ), as well as ProMutual’s sponsored risk retention group, Coverys RRG, Inc. (Coverys RRG) (Washington, DC). The outlook of these ratings remains stable. All companies are members of Coverys Companies (Coverys or the group).
The rating upgrades for MHA, Washington Casualty and PPIC are due to their strategic importance to the organization, and the implicit and explicit support provided by ProMutual. The ratings of ProMutual, which are based upon the consolidation of this company with its insurance subsidiaries and Coverys RRG, reflect its strong balance sheet, leading market presence in the U.S. medical professional liability (MPL) insurance sector and effective use of enterprise risk management. These positive rating factors are offset partially by a decline in operating performance and a concentration of underwriting risk in MPL insurance lines.
The group’s balance sheet is strong with supportive risk-adjusted capitalization, a favorable reserve position and ample liquidity. In addition, underwriting and investment leverage ratios are low. Coverys is one of the leading providers of MPL in the United States, ranking sixth in 2016, based on direct premium written. The group is active nationwide; however, its largest market share is in the northeastern states of Massachusetts, New Jersey, Connecticut, Pennsylvania and Michigan.
The positive rating factors are offset by a declining trend in underwriting and overall profitability, mainly due to an increase in claims severity, above average expenses, soft competitive pricing and continued low interest rate environment. Although the group’s investment returns contribute significantly to overall earnings, the negative trend in underwriting is a concern given current MPL market conditions.
The ratings may be affected positively through improved underwriting and overall operating performance providing support for Coverys’ strong balance sheet.
Negative rating action could occur if Coverys’ risk-adjusted capitalization were to weaken materially, which could result from significant deterioration of operating performance, potentially from an increase in claims frequency or severity, or from adverse reserve development. Negative rating movement also could occur if the trend of adverse earnings continues or does not show improvement in the near to medium term.
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. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.