A.M. Best Co. has upgraded the financial strength rating (FSR) to ‘A’ (Excellent) from ‘A’ (Excellent) and issuer credit ratings (ICR) to “a” from “a-” of ProAssurance Group and its group rated members. Best also upgraded the ICR to “bbb” from “bbb-” of ProAssurance’s parent holding company, ProAssurance Corporation (PRA), and revised its outlook on the ratings to stable from positive.
In addition Best upgraded the ICR to “bbb+” from “bbb” and affirmed the FSR of ‘B++’ (Good) of ProAssurance National Capital Insurance Company of (Washington, DC and affirmed the FSR of ‘A-‘ (Excellent) and ICR of “a-” of ProAssurance Wisconsin Insurance Company.
Best has also affirmed the FSRs of ‘A-‘ (Excellent) and ICRs of “a-” of The PICA Group, its member and PACO Assurance Company, Inc. (Illinois), which were recently acquired. The outlook for these ratings is also stable.
“These rating actions follow the positive outlook, which was assigned to ProAssurance in June 2008 and takes into consideration the group’s consistently strong operating performance over the last several years,” Best explained. “The rating upgrades further reflect ProAssurance’s excellent risk adjusted capitalization, conservative reserving and investing practices and its business position as one of the leading writers of medical professional liability insurance in the United States.”
in addition Best noted the “additional geographical and line of business diversification that PRA has achieved through three acquisitions in 2009. With the additions of The PICA Group, Georgia Lawyers Insurance Company and Mid-Continent General Agency, PRA has added to the number of states in which it writes, while considerably expanding its reach into the medical professional liability, lawyer professional liability and ancillary healthcare lines.”
Best also singled out “PRA’s strong management team” for its “extensive experience in the merger and acquisition arena, which largely mitigates any integration concerns. Furthermore, the integration risk of The PICA Group is minimal, as it will operate as a stand-alone subsidiary.”
Furthermore, Best said the ratings consider the “financial flexibility that PRA provides to the operating companies. PRA’s financial leverage (total debt/total capital) was a modest 2.4 percent at year-end 2008, following the redemption of over $107 million in convertible senior debentures in July 2008 and the reacquisition of $23 million in outstanding notes in December 2008. PRA’s interest coverage remains exceptionally strong, and it currently holds a substantial amount of cash and short-term investments outside of its insurance subsidiaries, which is available for use without regulatory approval.
“Partially offsetting these rating strengths are the inherent challenges associated with the medical professional liability insurance sector as it relates to price competition, legislative (tort) reform, loss cost trends and regulatory challenges. An additional factor is the history of moderate fluctuations in ProAssurance’s earlier operating results, driven by adverse reserve development in older accident years. However, more recent reserve development has been favorable, reflecting management’s corrective actions and general market conditions.”
Best summarized the ratings on the group as follows:
The FSR has been upgraded to ‘A’ (Excellent) from A- (Excellent) and the ICRs to “a” from “a-” for ProAssurance Group and its following members:
— ProAssurance Indemnity Company, Inc.
— ProAssurance Casualty Company
— ProAssurance Specialty Insurance Company, Incorporated
The FSR of ‘A-‘ (Excellent) and ICRs of “a-” have been affirmed for The PICA Group and its member, Podiatry Insurance Company of America.
Source: A.M. Best – www.ambest.com
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