On Thursday, rating agency A.M. Best Co. affirmed the ratings of ProAssurance Corporation (PRA), its ProAssurance Group (ProAssurance) and its group associates; and PRA’s subsidiaries-- ProAssurance Wisconsin Insurance Company (ProAssurance Wisconsin) and PACO Assurance Company Inc. (PACO).
A.M. Best Co. also upgraded the ratings of PRA’s other subsidiaries--PICA Group and its member-Podiatry Insurance Company of America (PICA), and ProAssurance National Capital Insurance Company (ProAssurance National).
The rating agency has affirmed the issuer credit ratings (ICR) of "bbb" for ProAssurance , along with the financial strength rating (FSR) of “A"(Excellent) and issuer credit ratings (ICR) of "a" for ProAssurance and its associates. The outlook for these ratings is stable.
On the other hand, A.M. Best revised the outlook on ProAssurance Wisconsin to positive from stable, and changed the outlook for PACO to negative from stable, reiterating the FSR of “A-" (Excellent) and the ICR of "a-" for both the subsidiaries.
The ratings for ProAssurance were based on their strong risk-adjusted capitalization and solid history of favorable business operations. In addition, the efficient risk management, geographical diversification and aggressive claim defense proved to be the strengths of ProAssurance and its associates. However, there are inherent market risks such as price competition, loss costs and legislative challenges associated with the medical professional liability sector, which restrain ProAssurance for a rating upgrade.
Furthermore, A.M. Best has upgraded the FSR to “A" (Excellent) from “A-“ (Excellent) and ICR to "a" from "a-" for PICA Group and PICA. The rating agency also upgraded the FSR to “A-“ (Excellent) from “B++" (Good) and ICR to "a-" from "bbb+" of ProAssurance National. The outlook for these ratings is stable.
Podiatry Insurance Company’s ratings were based upon its attractive capitalization, constructive operating performance and its strong leadership position throughout the United States. The upgrades at ProAssurance National were attributable to the company’s outstanding risk-adjusted capitalization, its leadership in providing medical professional liability insurance in its sole territory of the District of Columbia and enhanced underwriting performance.
A.M. Best also rates the financial strength of insurance companies and the security of holding companies' debt and preferred stock, thereby indicating its future performance. It rated "bbb" to senior unsecured debt, "bbb-" to subordinated debt and "bb+" to preferred stock. The outlook for all the above ratings is stable. ProAssurance states that the net proceeds from any debt-issuance or sale of securities by the company will be used for general corporate purposes.
ProAssurance’s financial leverage and the interest coverage are strong. Besides, the company is managing its investments well to ensure sufficient liquidity to meet its short-term and long-term obligations, considering the timing of cash flow from the investments. Moreover, all of ProAssurance’s insurance subsidiaries exceeded the minimum risk-based capital levels, as of December 31, 2009.
However, A.M. Best remains concerned about ProAssurance’s significant exposure to asset-backed securitizations and commercial mortgage-backed securities, which are affected by the economic and market factors. Although the rating actions principally reflect a favorable operating performance for the company and a significant market presence, we believe that the uncertain economic environment will continue to impact the financial health of the company in the upcoming quarters.
Read the full analyst report on "PRA"
Read the full analyst report on "PACO"
Read the full analyst report on "PICA"
Zacks Investment Research
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