AM Best Removes From Under Review with Negative Implications and Downgrades Credit Ratings of CMIC Group’s Members
October 10, 2019by
AM Best has removed from under review with negative implications and downgraded the Financial Strength Rating to B++ (Good) from A- (Excellent) and the Long-Term Issuer Credit Ratings to “bbb+” from “a-” of Connecticut Medical Insurance Company (Glastonbury, CT) and its sponsored risk retention group company, CMIC Risk Retention Group (District of Columbia). These companies are referred to collectively as CMIC Group (the group). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect the group’s balance sheet strength, which AM Best categorizes as strongest, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management.
The ratings were placed under review earlier this year in consideration of various strategic initiatives to be implemented by management aimed at improving operating performance. After conducting internal analysis, management decided not to pursue some of the proposed initiatives, largely as a result of costs versus the long-term benefit of such actions.
The ratings downgrade reflects a revision in AM Best’s view of the group’s operating performance from adequate to marginal. Underwriting losses (after policyholder dividends) have been generated since 2014, primarily due to increased claims severity, diminishing reserve redundancies and a declining premium base.
While the 10-year average underwriting and overall performance ratios compare favorably with the medical professional liability (MPL) composite, the more recent five-year ratios compare unfavorably to the MPL composite. Management has significantly reduced policy limits, implemented rate increases and revised underwriting guidelines in an attempt to improve results, which will take time to become evident due to the long-tailed nature of MPL insurance. In addition, management continues to analyze further options to improve operating performance.