A.M. Best Revises Outlooks to Stable for Members of NORCAL Group

OLDWICK, N.J.--()--A.M. Best has revised the outlooks to stable from negative and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a” of the members of NORCAL Group (NORCAL).

The Credit Ratings (ratings) reflect NORCAL’s balance sheet strength, which A.M. Best categorizes as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The revised outlooks are attributed to the reversal of a negative trend in underwriting and operating performance that developed earlier in the current five-year period, and A.M. Best’s expectation that management’s underwriting and claims initiatives will result in sustained improvement in underwriting and operating results.

The positive rating factors are derived from NORCAL's balance sheet strength, which benefits from its strongest risk-adjusted capitalization, conservative loss reserves, and ability to organically generate surplus through earnings. Operating earnings trended more favorably in recent years due to the addition of the historically lower loss ratio business of Preferred Physicians Medical Risk Retention Group, a Mutual Insurance Company, which was acquired in January 2017, as well as the impact of various initiatives implemented by management. Furthermore, NORCAL is one of the leading medical professional liability (MPL) insurers in the United States.

These positive attributes are offset partially by the inherent market risks associated with being a mono-line MPL carrier, specifically those related to underwriting cycle changes and potential changes in claims frequency and severity trends, as well as regulatory and tort reform issues. The MPL line is experiencing an extended soft market nationally, as well as challenging competitive dynamics, with physicians leaving private practice and taking employment opportunities with hospitals and the consolidation of large physician groups, making organic growth challenging. NORCAL mitigates the concentration risk through geographic diversification nationally and diversification among physician specialties, while still focusing on premium adequacy as part of its ERM.

The outlooks have been revised to stable from negative, and the FSR of A (Excellent) and the Long Term ICRs of “a” have been affirmed for the following members of NORCAL Group:

  • NORCAL Mutual Insurance Company
  • NORCAL Specialty Insurance Company
  • Medicus Insurance Company
  • FD Insurance Company
  • 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. 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 © 2018 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Contacts

A.M. Best
Sharon Marks, +1 908 439 2200, ext. 5477
Senior Financial Analyst
sharon.marks@ambest.com
or
Charles M. Huber, +1 908 439 2200, ext. 5122
Director
charles.huber@ambest.com
or
Christopher Sharkey, +1 908 439 2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, +1 908 439 2200, ext. 5644
Director, Public Relations
james.peavy@ambest.com

Contacts

A.M. Best
Sharon Marks, +1 908 439 2200, ext. 5477
Senior Financial Analyst
sharon.marks@ambest.com
or
Charles M. Huber, +1 908 439 2200, ext. 5122
Director
charles.huber@ambest.com
or
Christopher Sharkey, +1 908 439 2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, +1 908 439 2200, ext. 5644
Director, Public Relations
james.peavy@ambest.com