A.M. Best Affirms Ratings of APA and APSpecialty.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--May 26, 2004 A.M. Best Co. has affirmed the financial strength ratings of B+ (Very Good) of American Physicians Assurance Corporation (APA (All Points Addressable) Refers to an array (bitmapped screen, matrix, etc.) in which all bits or cells can be individually manipulated. APA - Application Portability Architecture ) and its subsidiary, APSpecialty Insurance Corporation (APSpecialty). Additionally, A.M. Best has affirmed the financial strength rating of B- (Fair) of Insurance Corporation of America (ICA Ica (ē`kä), city (1993 pop. 108,724), capital of Ica dept., SW Peru, on the Pan-American Highway. It is a commercial center for the cotton, wool, and wine produced in the region. There are several summer resorts nearby. ). APA and ICA are wholly owned subsidiaries Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of American Physicians Capital, Inc. (ACAP (Application Configuration Access Protocol) A protocol for storing configuration information in a central server. It is designed to enhance e-mail functions for remote users by providing a central location for personal address books and client application ) (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : ACAP). All companies are located in East Lansing East Lansing, city (1990 pop. 50,677), Ingham co., S central Mich., a suburb of Lansing, on the Red Cedar River; inc. 1907. The city was first known as College Park, but was renamed when it was incorporated. , MI. All ratings have been removed from under review with negative implications and assigned negative outlooks. Effective March 31, 2004, ACAP contributed the outstanding common shares of APSpecialty to APA. These were formerly sister companies. The rating of APA reflects its adequate capitalization, reduced focus on non-core business lines and its good business position as a specialty provider of medical liability coverages within the Midwest. However, during 2003, APA lost $50.2 million in surplus. This was due largely to a reserve charge of $28 million, net of tax, attributed to adverse loss reserve development reported during the third quarter of 2003 on claims associated with the company's run-off Florida medical liability business and Ohio and Kentucky policies, which were written on occurrence forms. APA exited the Florida market in December 2002 and ceased writing Ohio and Kentucky occurrence business in July 2002 and January 2003, respectively. However, APA continues to offer medical liability coverages on a claims-made form in Ohio and Kentucky. APA's risk-adjusted capitalization improved during the first quarter of 2004 due to a $25 million capital infusion Capital infusion Often refers to the cross-subsidization of divisions within a firm. When one division is not doing well, it might benefit from an infusion of new funds from the more successful divisions. from ACAP in January 2004 and the transfer of ownership of APSpecialty to APA. The excess capital at APSpecialty provided a near-term boost to APA's capitalization, as APSpecialty retained very little risk relative to its surplus level. Furthermore, rate increases, a sizable reduction in reported and open claims as well as strengthened case reserves should lead to an improvement in prospective underwriting results. The rating of APSpecialty reflects its limited business profile and volatile operating performance. While the company was originally formed to operate as a non-admitted carrier to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. limited capacity in certain segments of professional liability markets, management has ceased growth plans for APSpecialty and expects to deploy the majority of its capital to the core book of medical liability business of APA. The rating of ICA reflects its fair capitalization, which is the direct result of the third quarter 2003 loss portfolio transfers of all assets and liabilities pertaining to workers' compensation workers' compensation, payment by employers for some part of the cost of injuries, or in some cases of occupational diseases, received by employees in the course of their work. business that was previously written at APA and APSpecialty to ICA, and the subsequent dissolution of an intercompany reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. agreement with APA. In December 2003, ACAP announced its intention to withdraw from offering workers' compensation products with the expectation of a sharp decline in workers' compensation premiums in 2004. Nonetheless, A.M. Best is concerned that further adverse development of workers' compensation reserves could lead to a drain on the group's consolidated earnings. APA's negative rating outlook highlights A.M. Best's concerns that additional adverse loss reserve development and any slippage Slippage The difference between estimated transaction costs and the amount actually paid. Notes: Slippage is usually attributed to a change in the spread. See also: Spread, Transaction Costs Slippage in operating performance could impact APA's risk- adjusted capitalization. These concerns are magnified when assessing the historically poor earnings track record of APA. Moreover, the financial flexibility of ACAP is limited, as the majority of funds have been downstreamed into APA. While debt-to-capital at ACAP is less than 15%, A.M. Best is concerned that the holding company could be constrained in meeting ongoing debt service payments should the operations of the insurance entities not improve. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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