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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - JUNE 16, 2010 12:00 AM (EDT)
A.M. Best Co. has revised the outlook to stable from negative and affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit rating (ICR) of "a" of Pharmacists Mutual Insurance Company (Pharmacists Mutual).
Concurrently, A.M. Best has revised the outlook to stable from negative and affirmed the FSR of B+ (Good) and ICR of "bbb-" of Pharmacists Mutual's subsidiary, The Pharmacists Life Insurance Company (Pharmacists Life). Both companies are domiciled in Algona, IA.
The revised outlook of Pharmacists Mutual reflects the restored risk-adjusted capitalization to pre-2008 levels, as capital and surplus increased nearly 22% in 2009, principally due to improvements in the financial markets. Despite soft market constraints, the outlook also reflects the continuation of positive earnings prospects.
The ratings of Pharmacists Mutual recognize its sustained profitability, solid capitalization, efficient marketing strategy and niche profile as a leading insurer dedicated to the pharmaceutical industry. Pharmacists Mutual has specialized in providing commercial and professional liability coverage for pharmacies and pharmacy owners for 100 years. The ratings also acknowledge Pharmacists Mutual's consistently high customer retention ratios in recent years, further demonstrating its solid standing within this specialty market.
These positive rating factors are offset by the company's high common stock leverage, susceptibility to storm losses and lower than average investment return measures. The company also is susceptible to competitive pressures in this niche sector.
The ratings of Pharmacists Life reflects its complimentary role within Pharmacists Mutual's organizational structure and continued support from its parent, trend of increasing premiums and conservatively managed investment portfolio.
Partially offsetting the positive factors are Pharmacists Life's historical trend of net operating losses, modest contribution to the parent company, continued exposure to below investment grade bonds and increasing portion of reserves related to interest sensitive products from the high level of annuity sales in recent years.
For Best's Credit Ratings, an overview of the rating process and rating methodologies, please visit Best's Ratings & Analysis.
The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at Best's Credit Rating Methodology.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers.