Fitch Affirms ProAssurance’s Ratings; Outlook Stable
KEY RATING DRIVERS
The rating affirmation considers the solid capital position of PRA's operating subsidiaries, as well as their consistent profitability, low financial leverage, and strong reserve experience. In addition, PRA has a track record of prudent use of capital, claims management, and reserve processes. These characteristics are generally supportive of a higher rating per Fitch guidelines.
Offsetting these positives is the company's historical concentration of operations in the volatile medical professional liability (MPLI) line of business. Recent acquisitions, particularly of Eastern Insurance and Syndicate 1729 both done in 2014, have diversified premiums such that as of
While there are potential benefits from a more diversified product mix, there is uncertainty regarding the ultimate competitive profile and operating success of disparate operating segments particularly in regards to size, scale, and product distribution advantages.
PRA reported a calendar year GAAP combined ratio of 93.2% as
On an accident year basis, the company reported a 110.7% combined ratio for the nine months ended
MPLI follows a unique underwriting cycle to other commercial insurance lines. Industry premium volumes are shrinking due to fundamental market changes and price competition. Health care providers are moving from independent and smaller group practices towards employment with hospitals and large medical groups. This shift is changing purchase and coverage preferences for MPLI. Large groups are more likely to self-insure and use captive or alternative risk programs, reducing demand for primary MPLI coverage.
Fitch believes there are few companies in the traditional MPLI space that can respond to these trends. In particular, the trend to service larger and multi-state clients which can be an advantage to PRA.
The MPLI market includes many monoline MPLI writers that experienced strong capital growth in the last hard market and have limited underwriting opportunities outside of MPLI. Efforts to deploy capital by MPLI specialists is dampening market pricing and will restrict any potential for improving market conditions going forward.
As of
Within Fitch's rating rationale are multiple rating triggers. If PRA were to materially deviate from any of these items, especially for an extended period, the ratings could be affected.
RATING SENSITIVITIES
The following is a list of triggers that could lead to a downgrade of the debt rating and IDR:
--A sustained increase in financial leverage above 15%;
--A sustained reduction in earnings based interest coverage below 12x.
The following is a list of triggers that could lead to a downgrade of all ratings:
--An increase in financial leverage above 25% or decline in operating earnings-based coverage below 7x;
--Material adverse reserve development;
--An increase in the company's GAAP operating leverage of 1.0x or higher;
--A Prism capital model score below 'Strong' (currently 'Extremely Strong').
The following is a list of triggers that could lead to an upgrade:
--An improvement in market position size/scale while maintaining profitability.
FULL LIST OF RATING ACTIONS
Fitch affirmed the following ratings with a Stable Outlook:
ProAssurance Corporation
--IDR at 'A-';
--
Fitch has affirmed the IFS rating of the following companies at 'A' with a Stable Outlook:
--
--
--
--
--
--
--
--
--
--
Additional information is available on www.fitchratings.com
Applicable Criteria
Insurance Rating Methodology (pub.
https://www.fitchratings.com/site/re/887191
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1014786
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1014786
Endorsement Policy
https://www.fitchratings.com/regulatory
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://WWW.FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.
Copyright © 2016 by Fitch Ratings, Inc.,
The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from
For
View source version on businesswire.com: http://www.businesswire.com/news/home/20161115006103/en/
Fitch Ratings
Primary Analyst
Director
+1-312-606-2354
or
Secondary Analyst
James Auden, CFA
Managing Director
+1-312-368-3146
or
Committee Chairperson
Senior Director
+1-312-368-2085
or
Media Relations:
Email: [email protected]
Source: Fitch Ratings
Improving Analytics Capabilities in the Healthcare Industry
HIPAA Security & Privacy Official – Roles and Responsibilities Seminar (Philadelphia, PA, United States – January 5th-6th, 2017) – Research and Markets
Advisor News
Annuity News
Health/Employee Benefits News
Life Insurance News