Ratings: Toyota Motor, Interstate Bankers, Medical Assurance Co. of Mississippi

June 4, 2014

A.M. Best has affirmed the financial strength rating of ‘A’ (Excellent) and the issuer credit rating of “a” of Iowa-based Toyota Motor Insurance Company (TMIC), both with stable outlooks. Best said the “ratings reflect TMIC’s excellent risk-adjusted capitalization, underwriting income and overall earnings. Additionally, TMIC produces strong cash flows while maintaining liquidity and leverage metrics that outperform the industry composite. TMIC also benefits from support provided by its ultimate parent, Toyota Motor Corporation (Toyota) (Japan). TMIC plays a strategic role within the Toyota organization by providing vehicle service agreements, guaranteed auto protection agreements, excess wear and use coverage and tire and wheel protection sold through Toyota, Lexus and affiliated dealerships throughout the United States.” As offsetting factors Best cited “TMIC’s limited business profile as a single parent captive as well as its reliance on sales at Toyota’s level for premium generation.” In conclusion Best said: “Positive rating actions could occur if TMIC continues to produce sustainable robust overall earnings while maintaining its strong level of risk-adjusted capitalization.” Negative ratings actions could occur if underwriting results deteriorate and/or there is a significant decline in surplus.”

A.M. Best has downgraded the financial strength rating to ‘E’ (Regulatory Supervision) from ‘C-‘ (Weak) and the issuer credit rating to “rs” from “cc” of Chicago-based Interstate Bankers Casualty Company. Best explained that the rating actions “reflect Interstate Bankers being placed under regulatory supervision by the State of Illinois due to a Finding of Insolvency. The Agreed Order of Rehabilitation was signed and executed on May 1, 2014. The deterioration in Interstate Bankers’ operating results was driven by adverse loss reserve development on its non-standard automobile book of business, which resulted in a sharp decline in policyholders’ surplus and a significant decrease in risk-adjusted capitalization.”

A.M. Best has upgraded the financial strength rating to ‘A’ (Excellent) from ‘A-‘ (Excellent) and issuer credit rating to “a” from “a-” of Medical Assurance Company of Mississippi (MACM), and has revised its outlook on both ratings to stable from positive. “The ratings of MACM are reflective of its strong risk-adjusted capitalization, its history of favorable operating performance and conservative loss reserve position,” Best said. “The company also benefits from its sustainable expense advantage and dominant position in providing medical professional liability (MPL) insurance within the Mississippi physicians market.” As partial offsetting factors Best noted “the inherent market risks associated with being a single state, monoline MPL insurer, particularly as these risks relate to legislative (tort) reform, regulatory challenges and loss cost trends. MACM also exhibits elevated common stock leverage, increasing the potential for changes in surplus from volatility in the equity markets.” The report also noted that the company “has benefited from its conservative approach in booking case reserves, which has contributed to MACM’s ability to continue its mission of providing a long-term stable market for physicians in Mississippi. The company operates as a non-profit organization and is not required to pay state taxes nor obligated to participate in the state’s guaranty fund—all the while maintaining rate flexibility. However, MACM remains exposed to the potential for tort reform legislation on constitutional grounds as well as the potential for inconsistent awards by juries in Mississippi.” Best said the stable outlook is based on its “expectation of continued solid capitalization and sustained strong operating profitability under the company’s relatively stable operating environment.” In conclusion Best said: “Positive rating actions are not anticipated in the midterm, as MACM’s capitalization, operating performance and business profile fully support its current ratings. However, the company’s ratings/outlook may be adversely impacted by the development of a trend of unprofitable underwriting, adverse loss reserve development, or a significant decline in risk-adjusted capitalization.”

Was this article valuable?

Here are more articles you may enjoy.