AM Best Affirms Credit Ratings of ProAssurance Group Members, ProAssurance Corp.
June 20, 2024
byAM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a+” 
(Excellent) of the members of ProAssurance Group. Concurrently, AM Best has affirmed the Long-Term ICR of “bbb+” (Good) and the existing indicative Long-Term Issue Credit Ratings (Long-Term IR) of ProAssurance Corporation (PRA) (headquartered in Birmingham, AL). The outlook of the Credit Ratings (ratings) is stable. All companies are indirect subsidiaries of PRA. (See below for a detailed listing of subsidiaries and indicative Long-Term IRs.)
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 group’s balance sheet strength assessment remains in the strongest range reflective of its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), as well as quality of investments, adequate liquidity and strength of reserves. Loss reserve development trends over the prior 10 calendar and accident years have been mixed, driven in part by adverse development reported by the NORCAL subsidiaries, the development associated with a large national healthcare account and the emergence in 2023 of adverse development on the workers compensation line of business, reflecting the impact of rising medical severity.
The ratings also consider ProAssurance Group’s operating performance, which remains adequate, despite some deterioration over the past five-year period. The group’s operating results were impacted by the large national healthcare account’s non-renewal and the challenging loss environment in the specialty property/casualty segment’s healthcare professional liability and workers compensation segments, reflecting ongoing significant increases in average claim costs. Operating performance results and profitability in 2023 and through the first quarter of 2024 were bolstered by net investment income following the reallocation of investments and the continuation of higher yields. The ratings also consider the group’s national market position as one of the leading medical professional liability insurers in the United States with its breadth of product offerings across multiple disciplines, and geographic diversification. The ratings also recognize the group’s developed ERM framework and risk management capabilities across the organization.
The ratings also benefit from the financial flexibility afforded by PRA, the ultimate parent via access to the capital markets. PRA’s financial leverage is modest with adequate interest coverage, holding a significant amount of cash and short-term investments outside the insurance operations, which are available for use without regulatory approval or restriction. However, surplus growth has been limited over the most recent five-year period due to significant payments of dividends to PRA, which the parent has utilized for company stock repurchases and payment of shareholders’ dividends, and unrealized capital losses partially offsetting profitability. Management continues to remain committed to maintaining capital strength at its rated entities at levels commensurate with their ratings.
The stable outlooks reflect AM Best’s expectation that the group will maintain its strongest level of balance sheet strength assessment, supported by effective capital management, while ongoing initiatives implemented by management will maintain stable operating performance, supported by its favorable business profile.
Negative rating actions may occur if the group’s loss experience continues to impact underwriting profitability negatively and leads to further deterioration in operating performance trends. Negative rating action may also occur if the group's balance sheet strength weakens, which could result from deterioration of risk-adjusted capitalization or further adverse reserve development in its workers compensation or medical professional liability books from rising claims frequency or severity, or changes in regulatory, legislative and judicial actions. While unlikely in the near term, positive rating actions may occur following a positive trend in operating performance metrics that outpaces the group’s peers and materially contributes to surplus growth.
The FSR of A (Excellent) and the Long-Term ICRs of “a+” (Excellent) have been affirmed, with stable outlooks for the following members of ProAssurance Group:
- ProAssurance Indemnity Company, Inc.
- ProAssurance Specialty Insurance Company
- Medmarc Casualty Insurance Company
- ProAssurance Insurance Company of America
- ProAssurance American Mutual, A Risk Retention Group
- Allied Eastern Indemnity Company
- Eastern Advantage Assurance Company
- Eastern Alliance Insurance Company
- NORCAL Insurance Company
- NORCAL Specialty Insurance Company
- Medicus Insurance Company
- FD Insurance Company
- Preferred Physicians Medical Risk Retention Group, a Mutual Insurance Company
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
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