AM Best Revises Outlooks to Negative for Members of ISMIE Mutual Group

December 11, 2020 by matray

AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a­-” of ISMIE Mutual Insurance Co. and ISMIE Indemnity Co. Both companies are domiciled in Chicago, IL.

These Credit Ratings reflect ISMIE’s balance sheet strength, which AM Best categorizes as strongest, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

The revision of the outlooks to negative reflects pressure on the group’s operating performance assessment following deterioration in underwriting and operating results and the ongoing challenges that the group faces to improve near-term results in a difficult medical professional liability (MPL) market. Underwriting performance has suffered over the most recent five-year period, largely as a result of significant declines in premium and a reduction in favorable development of prior accident year reserves. In addition to these influences, ISMIE’s earnings have been impacted by declining levels of investment income due to the prolonged low interest rate environment. These mounting pressures resulted in a net loss in 2019 and through the third quarter of 2020.

ISMIE has implemented a strategy to improve operating performance, which includes rate increases and reducing policyholder dividends. However, underwriting and operating losses are expected to continue over the intermediate term. AM Best notes that risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), is expected to remain at the strongest level during this time.

The decline in the group’s earnings is further strained by its single state, monoline concentration of risk in the MPL sector as it relates to price competition, loss cost trends and regulatory challenges. The group is implementing an expansion strategy into new territories and product offerings as it seeks new opportunities to deploy its capital. AM Best will continue to monitor the group’s performance closely, given the considerable execution risk related to these initiatives.

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