Ratings Recap: United Auto/Argus, Doctors Co., GeoVera, Medical Mutual, MAG Mutual

June 17, 2011

A.M. Best Co. has placed under review with developing implications the financial strength rating of ‘C’ (Weak) and issuer credit ratings of “ccc” of Florida-based United Automobile Insurance Group and its member, United Automobile Insurance Company. Best has also downgraded the financial strength rating to ‘E’ (Under Regulatory Supervision) from ‘D’ (Poor) and issuer credit rating to “rs” from “c” of Argus Fire & Casualty Insurance Company, a wholly owned subsidiary of United Auto. Best said the rating actions on United “follow the Consent Order by the Florida Office of Insurance Regulation (OIR) on May 31, 2011,” which put under Argus under Regulatory Supervision and ordered the cancellation of all in force policies. Best added that the “under review status with developing implications for the group is the result of uncertainty, with respect to the potential impact on United Auto’s financial position, in the event of catastrophic weather events in Florida prior to the cancellation date of the Argus policies. The Consent Order stipulates that United Auto provide excess of loss per risk coverage to Argus in the aggregate amount of $5 million in excess of $100 thousand until such time that all policies have been cancelled, which is expected to occur in late July 2011. Going forward, the risk-adjusted capitalization of United Auto is anticipated to improve, without the impact of Argus’ prior property book of business.” Best added that the ratings will remain under review until the cancellation of all policies and the surrender of Argus’ Certificate of Authority to the OIR, which is expected in late July 2011, and until A.M. Best conducts further analyses and discussions with United Auto’s management.

A.M. Best Co. has upgraded the financial strength rating (FSR) to ‘A’ (Excellent) from ‘A-‘ (Excellent) and issuer credit rating (ICR) to “a” from “a-” of the Napa, Calif.-based Doctors Company Insurance Group (TDC) and its members, led by The Doctors Company, An Interinsurance Exchange. Best has also revised its outlook for the ratings to stable from positive. The rating upgrade “reflects TDC’s excellent capitalization, long-term underwriting profitability and leadership position in the medical professional liability market across multiple jurisdictions,” Best explained. The upgrade also “recognizes the group’s favorable reserve development and continued support for its physician members through strong patient safety and its risk management program. An additional favorable factor is the company’s dedication to sharing its financial success with its members through dividends and subscriber savings accounts.” As partial offsetting factors Best cited “the market risks inherent within the medical professional liability insurance sector including tort reform, price competition and regulatory trends. The outlook is based on the group’s ability to maintain excellent underwriting results across jurisdictions. It also takes into consideration the successful integration of multiple acquisitions made by the parent company within the last six years.” In addition Best said it has upgraded the FSR to ‘A’ (Excellent) from ‘A-‘ (Excellent) and ICR to “a” from “a-” of Underwriter for the Professions Insurance Company, and has revised its outlook for the rating to stable from positive. This company is a subsidiary of TDC, and through its relationship with the parent company, is afforded the same rating. Best has also upgraded the FSR to ‘A-‘ (Excellent) from ‘B+’ (Good) and ICR to “a-” from “bbb-” of SCPIE Indemnity Company, which is based in Los Angeles, as well as the FSR to ‘B++’ (Good) from ‘B+’ (Good) and ICR to “bbb+” from “bbb-” of Delaware-based American Healthcare Indemnity Company. The outlook for these ratings is stable. The ratings upgrade on these subsidiaries is “based on the companies’ strong capital position, favorable reserve development, a partial commutation of prior year’s loss reserves and ongoing support from the parent company,” Best explained. In an additional move Best has affirmed the FSR of ‘A-‘ (Excellent) and ICR of “a-” of American Physicians Group, along with its sole member, American Physicians Assurance Corporation, and the FSR of ‘B+’ (Good) and ICR of “bbb-” of APSpecialty Insurance Corporation. The outlook for these ratings is stable. The companies are domiciled in East Lansing, Mich. Best noted that they “were acquired by TDC during 2010, and are currently rated separately from the group. Support for these ratings is provided by their appropriate risk-adjusted capital positions and ongoing strong underwriting performance.” Best also noted that in conjunction with the above rating actions, it has withdrawn the FSR of ‘A-‘ (Excellent) and ICR of “a-” of Oregon-based Northwest Physicians Insurance Company, as it “no longer has any active policyholders or loss related liabilities and is expected to be dissolved during 2011.” Best summarized the rating actions as follows: The FSR has been upgraded to ‘A’ (Excellent) from ‘A-‘ (Excellent) and the ICR to “a” from “a-” for Doctors Company Insurance Group and its following members:
* The Doctors Company, An Interinsurance Exchange
* Professional Underwriters Liability Company
* OHIC Insurance Company

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 Calif.-based GeoVera Insurance Group and its members. Best also revised its outlook for all of the ratings to stable from positive. The rating upgrades reflect GeoVera’s “excellent risk-adjusted capitalization, strong operating earnings and management’s experience in its market segments,” Best explained. “GeoVera’s profitable underwriting performance, combined with solid investment income, has resulted in favorable operating earnings in each of the past five years.” Best also noted that GeoVera “maintains a moderate net underwriting leverage position due to prudent risk management efforts, which have further strengthened its risk-adjusted capital. GeoVera’s underwriting focus continues to capitalize on its experienced market knowledge in catastrophe-prone business segments.” Best then indicated that “although GeoVera concentrates all of its underwriting efforts on providing coverage in catastrophe-prone areas, it combines an established catastrophe-modeled and web-based quoting and binding system to ensure proper pricing with an extensive catastrophe reinsurance program to mitigate its exposure. However, GeoVera maintains high gross catastrophe leverage and is significantly dependent on reinsurance to reduce this exposure to a manageable level on a net basis.” Best summarized the companies affected by the rating action as follows: The FSR has been upgraded to ‘A” (Excellent) from ‘A-‘ (Excellent) and the ICR to “a” from “a-” for GeoVera Insurance Group and its following members:
* GeoVera Insurance Company
* Pacific Select Property Insurance Company
* GeoVera Specialty Insurance Company
* GeoVera Security Insurance Company
* GeoVera Re, Ltd.

A.M. Best Co. has upgraded the financial strength rating (FSR) to ‘A-‘ (Excellent) from ‘B++’ (Good) and issuer credit rating (ICR) to “a-” from “bbb+” of Medical Mutual Insurance Company of Maine (MMIC), and has revised its outlook for both ratings to stable from positive. The rating upgrade “reflects MMIC’s excellent capitalization, strong underwriting profitability and leadership position in the medical professional liability market in its home state,” said Best. “The upgrade also recognizes the group’s favorable reserve development and continued support for its physician members through strong patient safety and risk management programs. An additional favorable factor is the company’s dedication to sharing its financial success with its members through dividends.” As partial offsetting factors Best cited “the market risks inherent within the medical professional liability insurance sector including tort reform, price competition and regulatory trends. The rating agency explained that the “outlook is based on the group’s ability to maintain excellent underwriting results and favorable loss reserve trends through strong cycle management processes.”

A.M. Best Co. has upgraded the financial strength rating to ‘A’ (Excellent) from ‘A-‘ (Excellent) and the issuer credit ratings to “a” from “a-” of Atlanta-based MAG Mutual Group and its members, MAG Mutual Insurance Company and Professional Security Insurance Company, which is based in Scottsdale, AZ. Best has also revised the outlook for all of the ratings to stable from positive. The ratings of MAG Mutual reflect its “strong level of risk adjusted capitalization, favorable underwriting and operating profitability over the recent five-year period, and its leadership position in providing medical professional liability (MPL) insurance coverage to health care providers in its core state of Georgia,” Best explained. “Additionally, MAG Mutual has a seasoned geographic spread of business in other contiguous states in the Southeast, where it derives over half of its premium volume. The ratings also consider the favorable underwriting results generated by sizeable loss reserve redundancies taken during the past four years, reflective of the group’s conservative reserving position.” As partial offsetting factors Best noted “the group’s concentration risk by product, the highly competitive environment, potential challenges related to changes to tort reform in its major markets and the inherent volatility in the MPL line.” Best explained that the outlook “reflects the expectation that MAG Mutual will maintain strong capitalization, continue generating positive underwriting results despite the recent loss of a cap on non-economic damages in Georgia and demonstrate prudent cycle management practices. Over the last five years, the group’s operating profitability has benefited from favorable trends in the MPL sector and through management’s initiatives of improving rate adequacy and reducing policy limits. The group also benefits from the recent implementation of various corporate management tools and enterprise risk management initiatives. Furthermore, reform in the MPL legislation of key states has had a favorable impact on operating results as well.”

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