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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - JANUARY 31, 2012 12:00 AM (EST)
A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating of A (Excellent) and issuer credit rating of “a” of Ohio Bar Liability Insurance Company (OBLIC) (Columbus, OH).
The rating affirmations reflect OBLIC’s conservative operating strategy, strong risk-adjusted capitalization and historically strong overall profitability. The ratings also consider the company’s leadership position in providing lawyers’ professional liability insurance (LPLI) to sole practitioners and smaller-size law firms operating in Ohio. The positive rating factors for OBLIC are primarily derived from its continued focus and commitment to attorneys in Ohio by maintaining stability in the state’s LPLI market and offering high quality service to its policyholders.
These positive rating factors are partially offset by OBLIC’s product line and geographic concentration of risk. This increases its susceptibility to adverse loss trends and economic conditions, as well as challenges in the regulatory or legislative environment. Recently, OBLIC’s operating performance has been impacted by an upward trend in loss ratios during 2010 and 2011 and the difficult investment environment. OBLIC’s results have exhibited unfavorable underwriting performance over the past two years due to unexpected claims severity, including moderately higher defense costs.
A.M. Best has revised the rating outlook for OBLIC based on recent deterioration in operating profitability and the decline in surplus, which has been impacted in part by stockholder dividends declared over the recent five-year period. The company reported underwriting losses in 2010 and projects further losses for year-end 2011, which were not offset by favorable loss reserve development from prior accident years. Surplus has declined by 9% over the recent five-year period and another 7% during the first nine months of 2011. Management has plans to initiate a rate increase to address its focus on disciplined pricing and conservative reserving at OBLIC; however, this will not be reflected in earned premiums until late 2012 and into 2013. OBLIC also has experienced turnover in its senior executives, which may lead to some execution risk on programs designed to enhance the company’s operations.
The ratings of OBLIC could be downgraded as a result of continued adverse underwriting performance such as from elevated loss costs and/or inadequate loss reserves.
Positive rating actions for OBLIC could result from favorable results stemming from measures taken to restore its underwriting and operating performance back to profitability, and the generation of surplus in order to maintain strong capitalization.
The principal 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.