Ratings of Preferred Physicians Medical Risk Retention Group Upgraded

A.M. Besthas upgraded the financial strength rating to A (Excellent) from A- (Excellent) and the issuer credit rating to “a” from “a-” of Preferred Physicians Medical Risk Retention Group Inc. (Preferred Physicians) in Kansas City, Mo. The outlook for each rating has been revised to stable from positive.

The ratings reflect Preferred Physicians’ strong risk-adjusted capitalization, its extended trend of above average earnings driven by very profitable underwriting through market cycles, and a business profile focused on providing medical professional liability coverage to anesthesiologists in multiple states.

Historical underwriting gains have been driven by the company’s focused underwriting strategy, extensive risk management program, geographic diversification, low claims frequency and conservative reserving that has produced redundancies year-over-year.

These positive rating factors are partially offset by Preferred Physicians’ narrow spread of risk as it operates exclusively in the anesthesiology segment of the medical professional liability market, which is characterized by its low frequency and high severity of claims.

Given its market segment concentration, the company also faces the inherent challenges as they relate to price competition, legislative (tort) reform, as well as rising underwriting expenses and loss cost trends. However, despite the company’s limited business profile, underwriting is also supported by extensive data related to its specialty focus.

Source: A.M. Best