Press Release - JUNE 05, 2014

A.M. Best Upgrades Ratings of LAMMICO and LAMMICO Risk Retention Group, Inc.


CONTACTS:
 
Robert E. Brokaw
Financial Analyst
(908) 439-2200, ext. 5771
robert.brokaw@ambest.com

Charles M. Huber
Managing Senior Financial Analyst
(908) 439-2200, ext. 5122
charles.huber@ambest.com

Jim Peavy
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

OLDWICK - JUNE 05, 2014
A.M. Best has upgraded the financial strength rating to A (Excellent) from A- (Excellent) and the issuer credit ratings to "a" from "a-" of LAMMICO (Metairie, LA) and its sponsored risk retention group, LAMMICO Risk Retention Group, Inc. (RRG) (District of Columbia). The outlook for all ratings has been revised to stable from positive.

The ratings reflect the group's strong capitalization driven by a conservative loss reserving philosophy, consistently favorable operating performance and high policyholder retention. The ratings also recognize LAMMICO's leadership position in providing medical professional liability insurance coverage to physicians and surgeons, other health care practitioners and health care facilities in Louisiana. The companies benefit from tort reform in 2012 establishing a maximum cap for non-economic damages. Significant reinsurance support also is provided to RRG through a 95% quota share agreement with its sponsor, LAMMICO.

. These positive attributes are partially offset by the inherent market risks associated with being largely a single state, mono-line medical professional liability insurer, as they relate to legislative and regulatory challenges, competition, loss cost trends and price adequacy. Other risk factors include the potential for successful challenges to tort reform or changes in the Louisiana Patient's Compensation Fund (LPCF) to pay claims in Louisiana, as well as the potential for unprofitable expansion by RRG.

These concerns are partially mitigated by a recent appeal on the constitutionality of the cap, which the State Supreme Court denied. However, future challenges to tort reform and potential changes to the LPCF may still occur. The LPCF limits the group's risk by taking a portion of the risk layer for an insured's loss. While the group's enhanced surplus position, reserve conservatism and lower per claim retention help protect against an adverse change to the cap or the LPCF, the legislative environment is stable for the near term, but remains susceptible to change.

The outlook is based on A.M. Best's expectation of strong capitalization and favorable operating performance over the long term, which should benefit from the favorable tort reform environment.

Positive rating actions are not anticipated in the midterm for the group as the capitalization, operating performance and business profile are fully supportive of the current ratings. The outlook and/or ratings may be adversely impacted by the development of a trend of unprofitable underwriting, adverse loss reserve development and/or a significant decline in risk-adjusted capitalization.

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 www.ambest.com/ratings/methodology.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.


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AMB# Company Name
001712 LAMMICO
018829 LAMMICO Group
022002 LAMMICO Risk Retention Group, Inc.