A.M. Best Co. announced that it has further downgraded the financial strength rating to C+ (Marginal) from B- (Fair) for MIIX Group, Lawrenceville, New Jersey, with the outlook continuing to be negative.
The rating action applies to MIIX Insurance Company and its two subsidiaries, Lawrenceville Property & Casualty Company and MIIX Insurance Company of New York. Best also removed the companies from under review.
The move brought a quick response from MIIX CEO Patricia Costante, who issued a written statement, stressing management’s “commitment to developing a new operating plan that ensures the long term financial strength of the Company.” She indicated that “We do not believe that the rating change reflects the potential positive impact of our ongoing actions.”
A.M. Best said that its action “reflects the significantly weakened capitalization resulting primarily from adverse loss reserve development, funds held charges and establishment of a valuation reserve to offset a deferred tax asset. As a result, both subsidiaries reported on their financial statements Risk Based Capital (RBC) ratios below the minimum threshold required by the National Association of Insurance Commissioners (NAIC).”
Best’s statement attributed the adverse developments to “a trend of unprecedented loss severity that emerged in the latter half of 2001–particularly in the Pennsylvania institutions book–as well as adverse development associated primarily with physician business in certain other states, most notably Pennsylvania, Texas and Ohio.”
Costante also noted that MIIX had recently engaged Fox-Pitt, Kelton Inc. as financial advisors “to explore strategic alternatives for the company.” (See IJ Website March 21). She expressed confidence that the management team now in place has the requisite experience and commitment to stabilize the situation, and stated that, “We strongly believe in our ability to become profitable.”
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