A.M. Best Revises Outlook to Positive for Kansas Medical Mutual Insurance Company

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has revised the outlook to positive from stable and affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of Kansas Medical Mutual Insurance Company(KaMMCO) (Topeka, KS).

The ratings of’ KaMMCO are reflective of its strong capitalization, long-term and consistent record of profitable underwriting and overall earnings performance as well as its dominant market position in the medical professional and hospital professional liability market in Kansas. These positive rating factors are primarily derived from the company’s long-term pricing and underwriting discipline, strong retained earnings and sound capital management.

Partially offsetting these positive rating factors are KaMMCO’s restricted geographic spread of risk (i.e., being essentially a single state writer), the current challenge to tort reform in Kansas and the potential for market fluctuations caused by the cyclicality inherent in the medical professional liability (MPL) line of business. Furthermore, competition has caused premiums to decline over recent years, impacting cash flow in 2011.

As a leading MPL insurance provider in Kansas, KaMMCO’s profitability also is a by-product of the state’s relatively conservative judicial and legislative climate and its favorable tort reform environment (including caps on non-economic damages). KaMMCO benefits from the existence of the Health Care Stabilization Fund, which shares a risk layer for losses incurred by physicians and hospitals in Kansas. Distribution diversification and customer service also have played a role in allowing KaMMCO to grow its book in a profitable manner over an extended period of time.

A.M. Best’s revised outlook for KaMMCO is based on the improved capitalization and continuation of strong operating profits, driven by the company’s focus on underwriting discipline.

Positive rating actions for KaMMCO could result from its continued favorable performance on both an underwriting and operating basis and the consistent generation of surplus and maintenance of strong capitalization under a stable market environment. The company’s financial metrics measure favorably amongst its peers.

The ratings/outlook of the company could be downgraded as a result of adverse underwriting performance due to significant claims and inadequate loss reserves, a change to the operating climate due to negative rulings on tort reform, etc., a sizeable change in its exposure growth or an investment loss, which could cause the level of capitalization to decline.

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. Key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies” and “Understanding BCAR for Property/Casualty Insurers.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2012 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.

A.M. Best Co.
Robert E. Brokaw
Financial Analyst
908-439-2200, ext. 5771
[email protected]
or
Henry K. Witmer
Assistant Vice President
908-439-2200, ext. 5097
[email protected]
or
Rachelle Morrow
Senior Manager, Public Relations
908-439-2200, ext. 5378
[email protected]
or
Jim Peavy
Assistant Vice President, Public Relations
908-439-2200, ext. 5644
[email protected]

Source: A.M. Best Co.