Standard & Poor’s Ratings Services announced that it has lowered its counterparty credit and financial strength ratings on New Jersey-based Princeton Insurance Co. to ‘Bpi’ from ‘BBBpi’ “because of adverse reserve development in 2002 and 2001, which significantly affected the company’s operating performance and capitalization.”
S&P credit analyst Tom E. Thun indicated: “Standard & Poor’s believes the company will continue to be challenged in the deteriorating medical malpractice market within its primary state of business, New Jersey. The prior rating on the company reflected the benefits from implied group support from the Hum Group of Co. Inc. Because of Princeton’s poor performance, the benefit of implied group support has been removed.
“Reserve deficiencies in its medical malpractice and workers’ compensation business weighed heavily on its year-end capitalization,” Thun added, “and future underwriting profitability to regain those losses remains questionable in the medium term.”
S&P noted that the company “primarily underwrites medical malpractice (64% of direct premiums) and workers’ compensation coverages (28%). New Jersey, Pennsylvania, and New York contribute more than 75% of total direct premium revenue.”
S&P’s action follows reports indicating that New Jersey’s Department of Banking and Insurance is also worried about Princeton’s financial condition, and is considering the possibility of placing the company under supervision.