A.M. Best has removed from under review with negative
implications and affirmed the Financial Strength Rating (FSR) of A
(Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of
"a" of Preferred Physicians Medical Risk Retention Group, a Mutual
Insurance Company (PPM RRG) (Kansas City, MO). The outlook assigned
to these Credit Ratings (ratings) is negative. Concurrently, A.M. Best
has affirmed the FSR of A (Excellent) and the Long-Term ICRs of "a" for
the members of NORCAL Group (NORCAL or the group). The outlook of
these ratings remains negative. (Please see below for a detailed listing
of the companies.)
The ratings of NORCAL reflect the group's supportive balance sheet
strength, as evidenced by its strong risk-adjusted capitalization, sound
liquidity and low underwriting leverage, and historically profitable
operating performance. In addition, the group's reserves have been
redundant year after year. The ratings also recognize NORCAL's proactive
risk management and leadership position as one of the largest providers
of medical professional liability (MPL) insurance in the United States
based on direct premium written. The group is well-recognized for its
admitted and excess and surplus lines businesses.
The rating outlooks are negative due to erosion of underwriting
performance, primarily in 2013 and 2014, and a steady decline in written
premium. This has raised concerns about future performance as the
group's underwriting is concentrated in MPL lines, which are
experiencing a soft market pricing and changing market dynamics.
The ratings of PPM RRG have been removed from under review with negative
implications and the risk retention group (RRG) has been assigned th
ratings of NORCAL Mutual Insurance Company (NORCAL Mutual), the
lead company of the NORCAL Group. NORCAL Mutual acquired PPM RRG's
attorney-in-fact, PPM Services, Inc., on Jan. 1, 2017. As a
result of this transaction, NORCAL obtained effective control of the RRG
and immediately implemented a 100% quota share reinsurance agreement and
loss portfolio transfer agreement from the RRG to NORCAL Mutual.
The acquisition of PPM RRG is viewed positively by A.M. Best. The RRG
has been very profitable, and its addition to the group should help to
further improve NORCAL's underwriting performance and reverse the
declining premium trend. However, the rating outlooks will remain
negative until a more prolonged improvement period can be observed.
The FSR of A (Excellent) and the Long-Term ICRs of "a" have been
affirmed for following members of the NORCAL Group:
The FSR of A (Excellent) and the Long-Term ICR of "a" has been removed
from under review and affirmed for the following member of the NORCAL
This press release relates to Credit Ratings that have been published
on A.M. Best's website. For all rating information relating to the
release and pertinent disclosures, including details of the office
responsible for issuing each of the individual ratings referenced in
this release, please see A.M. Best's Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view Understanding
Best's Credit Ratings.
A.M. Best is the world's oldest and most authoritative insurance
rating and information source. For more information, visit www.ambest.com.
Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its
subsidiaries. ALL RIGHTS RESERVED.
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