OLDWICK, N.J.--(BUSINESS WIRE)--
A.M. Best Co. has affirmed the financial strength rating of A-
(Excellent) and issuer credit rating (ICR) of "a-" of American
Physicians Insurance Company (API) (Austin, TX). A.M. Best
also has affirmed the ICR of "bbb-" of API's parent holding company, American
Physicians Service Group, Inc. (APS) (Austin, TX) (NASDAQ: AMPH). The
outlook for all ratings is stable.
API's ratings reflect its excellent risk-adjusted capital position,
solid history of operating profitability and strong policyholder
retention levels. Furthermore, API is directed by an experienced
management team, which has skillfully utilized the local market
knowledge obtained from API's longstanding commitment to the Texas
healthcare community to its competitive advantage. The company's
profitability also has been enhanced by the passage of tort reform in
2003, which has contributed to an influx of physicians into Texas and a
significant reduction in claim frequency. The stable outlook reflects
A.M. Best's expectations that a solid level of profitability will be
maintained over the near term, further supporting API's risk-adjusted
capitalization.
The ratings also take into consideration the financial flexibility of
APS. At June 30, 2009, APS' financial leverage (total debt/total
capital) was minimal at 4.3%. The long-term debt consists solely of $7
million in mandatorily redeemable preferred stock, which is to be
redeemed at $1 million per year through 2016. In addition, there
continues to be a substantial amount of cash and investments at the
holding company level.
Partially offsetting these positive rating factors are the market risks
associated with being a predominantly single state, monoline medical
professional liability insurer as it relates to price competition, loss
cost trends and regulatory challenges. In addition, API's exposure base
continues to grow, which has led to additional risks in the pricing,
claim and reserving areas. However, these risks are mitigated by the
company's conservative reserve position and excellent risk-adjusted
capital position.
For Best's Credit Ratings, an overview of the rating process and rating
methodologies, please visit www.ambest.com/ratings.
The principal methodologies used in determining these ratings, including
any additional methodologies and factors that may have been considered,
can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is a global full-service credit
rating organization dedicated to serving the financial and health care
service industries, including insurance companies, banks, hospitals and
health care system providers. For more information, visit www.ambest.com.
Source: A.M. Best Co.
Contact: A.M. Best Co.
Analysts
Greg Williams, 908-439-2200, ext. 5815
greg.williams@ambest.com
or
Henry Witmer, 908-439-2200, ext. 5097
henry.witmer@ambest.com
or
Public Relations
Jim Peavy, 908-439-2200, ext. 5644
james.peavy@ambest.com
or
Rachelle Morrow, 908-439-2200, ext. 5378
rachelle.morrow@ambest.com