S&P’s lowered its counterparty credit and financial strength ratings on Attorneys Liability Protection Society Inc. (ALPS), a risk retention group, to “BBB” from “A-” and removed the company from CreditWatch, where it was placed in mid-March. The outlook is negative.
The action reflects the company’s decision to strengthen its reserves by $7.3 million at the end of 2002. The reserve strengthening was targeted to the accident years 1998 through 2001. Even further reserve strengthening should follow ALPS’ analysis of the 2002 accident year.
The “BBB” rating reflects the company’s demonstrated ability to increase rates in the current environment, strong but diminished capitalization as measured by a S&P’s capital adequacy ratio of 166 percent, and a good niche servicing small to midsize law practices.
The negative outlook reflects the challenges faced by the company. It will need a period of sustained rate increases and effective underwriting controls, in addition to renewed reserve and claims discipline to return ALPS to an underwriting profit.
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