Best’s News & Research Service - November 24, 2008 02:32 PM (EST)
A.M. Best Downgrades Issuer Credit Ratings of Lawyers Mutual of North Carolina Group & Its Member; Revises Outlook to Negative
OLDWICK, N.J. //BestWire// - A.M. Best Co. has downgraded the issuer credit ratings (ICR) to “a” from “a+” and affirmed the financial strength rating (FSR) of A (Excellent) of Lawyers Mutual of North Carolina Group (LML) and its member, Lawyers Mutual Liability Company of North Carolina (both of Cary, NC). The outlook for all ratings has been revised to negative from stable.
The downgrading of the ICRs of LML is based on a detailed review of the company’s historical combined and operating ratios. These ratios have deteriorated over the last several years, including the current year, to levels that are more reflective of expectations of an ICR of “a”. Nonetheless, LML maintains a strong risk-adjusted level of capitalization, exhibits historically overall profitable operations including policyholder dividends and is managed by a knowledgeable team with a commitment to the North Carolina legal profession. As a result, A.M. Best affirmed LML’s FSR.
The negative outlook on the ratings reflects LML’s 9% reduction in policyholder surplus for the first nine months of 2008. The deterioration in surplus is driven by net underwriting losses caused by historically high claims activity for 2008. In addition, LML’s investment portfolio has been affected adversely by the current economic environment. A.M. Best is concerned that a continuation in these negative trends could impede LML’s efforts to meet its goals and impact its currently strong risk-adjusted capitalization.
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