A.M. Best Revises Outlook to Positive for Louisiana Medical Mutual Insurance Company [Professional Services Close – Up]

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 Louisiana Medical Mutual Insurance Company (LAMMICO) (Metairie, LA).

The revised outlook reflects the continuing growth in balance sheet strength and consistent positive operating performance. LAMMICO also benefits from favorable tort reform laws in its core state of Louisiana, which recently were upheld by the state Supreme Court. LAMMICO is the dominant provider of medical professional liability insurance in Louisiana and is thoroughly familiar with the risks of its insureds in the state.

The affirmation of the ratings reflects LAMMICO's excellent capitalization, driven by its conservative loss reserving philosophy, consistently favorable operating performance, high policyholder retention and leadership position in providing medical professional liability insurance coverage to physicians and surgeons, other health care practitioners and health care facilities in the state of Louisiana. Louisiana has a Patient's Compensation Fund (PCF) that is available to all physicians practicing in the state. For LAMMICO, it limits the company's loss exposure by assuming the excess portion of the risk layer for an insured's loss.

These positive attributes are partially offset by the inherent market risks associated with being primarily a single state, monoline medical professional liability insurer, as they relate to legislative and regulatory challenges, competition, loss cost trends and price adequacy. This was exhibited by the volatility within its operating performance and capitalization in older years. Additionally, LAMMICO may be affected negatively if there are any adverse changes to the Louisiana PCF.

Upward rating action for LAMMICO could result from long-term favorable performance on an underwriting and operating basis, and the consistent generation of surplus and maintenance of strong capitalization.

Negative rating movements could occur as a result of adverse underwriting performance due to significant claims and inadequate loss reserves, rapid exposure growth or an investment loss, which could cause the level of capitalization to no longer support 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: ambest.com/ratings/methodology.

A.M. Best Company is an insurance rating and information source.

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