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FOR IMMEDIATE RELEASE
OLDWICK - APRIL 26, 2022 02:51 PM (EDT)
AM Best has revised the outlook to stable from negative for the Long-Term Issuer Credit Ratings (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICRs of “a+” (Excellent) of the members of ProAssurance Group. The outlook of the FSR is stable. Concurrently, AM Best has revised the outlook to stable from negative for the Long-Term ICR, and affirmed the Long-Term ICR of “bbb+” (Good) and all existing Long-Term Issue Credit Ratings (Long-Term IR) of ProAssurance Corporation (PRA) (headquartered in Birmingham, AL). In addition, AM Best has affirmed the FSR of A- (Excellent) and the Long-Term ICRs of “a-” (Excellent) of the members of NORCAL Group (NORCAL). The outlook of these Credit Ratings (ratings) is stable. All companies are indirect subsidiaries of PRA. (See below for a detailed listing of the companies’ ratings.)
The ratings of ProAssurance Group reflect its balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management (ERM).
The revised outlook to stable for the Long-Term ICRs of ProAssurance Group’s members reflects the group’s continued strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), following the acquisition of NORCAL, supported by financial flexibility afforded by the holding company, solid liquidity, prudent loss reserve position and conservative investments. The group’s operating performance continues to be adequate as results in 2021 benefited from the completed re-underwriting of its book of business, strong rate gains, and synergies created through the acquisition and integration with NORCAL, following some deterioration in recent years, driven by one large health care account that has been non-renewed, and the prolonged soft market for the industry. Similar to its peers in the medical professional liability (MPL) industry, court delays have impacted the reporting and the incurred pattern of claims in recent years, and the impact is expected to continue in 2022.
As a leading national provider of MPL insurance in the United States and its successful track record of partnering and acquiring companies and integrating them into the ProAssurance family of companies, the acquisition of California-based NORCAL is expected to benefit the organization further by adding scale to its already diverse profile. These ratings also consider the depth and breadth of ProAssurance Group’s ERM programs and policies.
The stable outlooks for ProAssurance Group’s members reflect AM Best’s expectation that the group will maintain its overall balance sheet assessment, supported by its strongest risk-adjusted capitalization, as measured by BCAR, and effective capital management, while ongoing underwriting and integration initiatives implemented by management will continue to improve the group’s operating performance over the intermediate term.
The ratings of NORCAL reflect its balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, neutral business profile and appropriate ERM. The ratings also reflect rating enhancement provided by the ProAssurance Group.
NORCAL’s risk-adjusted capitalization remains at the strongest level, as measured by BCAR, as of year-end 2021. However, risk-adjusted capitalization is offset by volatility driven by reserve charges and surplus declines in recent years. Liquidity measures are sound and supported by an increasing asset base. AM Best expects NORCAL’s marginal operating performance to continue over the near term largely driven by poor underwriting results reflective of reserve deterioration, although NORCAL may benefit from re-underwriting and pricing initiatives, as well as its integration into ProAssurance Group. However, similar to ProAssurance Group and the MPL industry, court delays have impacted the reporting and the incurred pattern of claims in recent years. NORCAL’s business profile remains neutral despite some geographic concentration in California, which could be a concern from a regulatory and tort reform perspective. Rating enhancement afforded to NORCAL reflects the benefits received from implicit and explicit support following the group’s acquisition by ProAssurance Group.
The stable outlooks for NORCAL’s members reflect AM Best’s expectation that NORCAL’s rating fundamentals will remain unchanged over the intermediate term. Risk-adjusted capitalization is expected to remain supportive while ongoing strategic initiatives implemented by ProAssurance Group and integration into the ProAssurance family of companies are expected to stabilize operating performance and support the group’s business profile and ERM.
The FSR of A (Excellent) and the Long-Term ICRs of “a+” (Excellent) have been affirmed, with the Long-Term ICR outlook revised to stable from negative and the FSR outlook at stable for the following members of the ProAssurance Group:
The following Long-Term IRs have been affirmed with stable outlooks:
ProAssurance Corporation—
—“bbb+” (Good) on $250.0 million 5.30% 10-year senior unsecured notes, due 2023
The following indicative Long-Term IRs under the shelf registration have been affirmed with stable outlooks:
ProAssurance Corporation—
— “bbb+” (Good) on senior unsecured debt
— “bbb” (Good) on senior subordinated debt
— “bbb-” (Good) on preferred stock
The FSR of A- (Excellent) and the Long-Term ICRs of “a-” (Excellent) have been affirmed with stable outlooks for the following members of NORCAL Group:
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.