S&P Announces: Professionals Direct Insurance Co. Ratings Affirmed; Outlook Remains Negative.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- On Dec. 15, 2004, Standard & Poor's Ratings Services Ratings Service A company, such as Moody's or Standard & Poor's, that rates various debt and preferred stock issues for safety of payment of principal, interest, or dividends. affirmed its 'BBB' counterparty Counterparty The other participant, including intermediaries, in a swap or contract. credit and financial strength ratings on Professionals Direct Insurance Co. (PDIC PDIC Philippine Deposit Insurance Corporation PDIC Professional Diving Instructors Corporation PDIC Parkinson's Disease Information Center PDIC Program Installations by Classification Document PDIC Palestine Development and Investment Company ). The outlook remains negative. The ratings reflect the company's strong capitalization, modest premium growth, and good operating performance, offset by an estimated $2.2 million reserve deficiency reserve deficiency A shortage in funds set aside as a reserve for a specific purpose. For example, during a recession a firm may find the reserve fund covering allowance for bad debts deficient when the amount of bad debts exceeds expectations. compared with year-end 2003. Outlook The outlook reflects Standard & Poor's concerns about the rapid geographic expansion PDIC undertook from mid-2002 to mid-2003 and the uncertainty regarding the level of losses that could be experienced with the new business. For 2005, Standard & Poor's expects direct written premium growth of 3%-5%, a loss ratio of 65%-70% with an expense ratio of about 30%, and a year-end capital adequacy ratio Capital adequacy ratio (CAR), also called Capital to Risk (Weighted) Assets Ratio (CRAR)[], is a ratio of a bank's capital to its risk. National regulators track a bank's CAR to ensure that it can absorb a reasonable amount of loss. (CAR) of more than 200%. Major Rating Factors --PDIC is a monoline writer of lawyers' professional liability insurance. Its focus is on small firms (1-5 attorneys) in tier-two cities and rural areas. As expected, premium growth in 2004 has been at a much more modest pace than the 134% increase experienced in 2003, with in-force primary layer premium increasing only 3% through the first nine months of 2004. Through August 2004, PDIC's renewal rate was 80%, and an average rate increase of 5% was obtained on all policies renewing during this period. --A change in claims processing methodology, designed to enhance the consistency of claims handling as well as expedite ex·pe·dite tr.v. ex·pe·dit·ed, ex·pe·dit·ing, ex·pe·dites 1. To speed up the progress of; accelerate. 2. the booking of the reserve for the ultimate claim amount, was implemented at the beginning of 2004. Primarily due to this change in methodology, PDIC's outside actuary's midyear mid·year n. 1. The middle of the calendar or academic year. 2. a. An examination given in the middle of a school year. b. midyears A series of such examinations. 2004 reserve review indicated an overall deficiency of about $1 million, compared with the year-end 2003 loss estimates. --PDIC's capitalization remains strong, with a year-end 2003 CAR of 249%, as measured by Standard & Poor's capital model, and an estimated CAR as of Sep. 30, 2004 of 240%. These ratios incorporate an additional reserve deficiency estimated by Standard & Poor's, above the outside actuary's estimate, of about $1.2 million, for a total estimated deficiency of $2.2 million, which was 15% of PDIC's posted reserves as of Sept. 30, 2004. --The company's operating performance is good, with a loss ratio of 67% and an expense ratio of 32% generated through Sept. 30, 2004. Also during this timeframe, the actual frequency of 2.66 demands/suits per 100 lawyers was less than the five-year norm of 3.05. Ratings List Counterparty credit rating BBB/Negative/-- Financial strength rating BBB/Negative Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar A set of buttons or graphic images typically in a row or column used as a central point that link you to major topic sections on a Web site. If the navigation bar is a single graphic image with multiple selections, it is known as an imagemap. See imagemap. , select Find a Rating, then Credit Ratings Search. |
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