A.M. Best Assigns Ratings to Galen Insurance Company [Professional Services Close – Up]

A.M. Best Co. has assigned a financial strength rating of B+ (Good) and an issuer credit rating of "bbb-" to Galen Insurance Company (Galen) (St. Louis, MO).

The outlook assigned to both ratings is stable.

These ratings reflect Galen's strong capitalization along with its satisfactory operating results achieved through underwriting selectivity and effective claims management. To date, the company's relatively short operating history has reflected premium adequacy and loss experience, which is outperforming the industry. A.M. Best believes that potential loss reserve redundancies are an attribute that may contribute to Galen building surplus over time. Galen is a medical professional liability insurer to independent physicians, allied medical professionals and free-standing clinics and surgery centers primarily in Missouri and Illinois.

These positive rating factors are partially offset by Galen's plans for brisk expansion into numerous states, which could challenge capital strength and reduce its financial flexibility in the near to medium term. Other offsetting rating factors are the increasing market trend of hospitals employing physicians, constraining prospective policyholders from the company, as well as the inherent challenges associated with the medical professional liability insurance sector as it relates to regulation, increased competition, legislative (tort) reform and loss cost trends.

A.M. Best expects the ratings for Galen to remain stable in the medium term. Prospectively, evidence of sustainable earnings fundamentals such as combined and operating ratios that outperform industry peers could positively impact the ratings. Conversely, declining capital adequacy beyond A.M. Best's expectations as measured by Best's Capital Adequacy Ratio (BCAR) or weakening operating trends could negatively impact the company's ratings. Industry and market factors such as disruption in market dynamics, adverse effects from changes in health care delivery or shifting claim severity and frequency patterns also could pressure the ratings.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at ambest.com/ratings/methodology.

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