Fitch Affirms The Doctors Company Group's Ratings; Outlook Stable

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has affirmed the 'A' Insurer Financial Strength (IFS) ratings on The Doctor's Company, an Inter-Insurance Exchange (Doctors) and its wholly owned insurance subsidiaries (see list below), collectively referred to as The Doctors Company Group (TDC). The Rating Outlook for all ratings is Stable.

TDC's ratings are based on above-average underwriting performance and profitability relative to medical professional liability insurance (MPLI) peers, favorable loss reserve levels, strong statutory capital position, and an experienced management team that employs a conservative operating strategy that is focused on long-term underwriting profitability.

The rating also considers that TDC is a mono-line insurer operating in one of the more volatile segments of the property/casualty insurance industry. Market conditions in the last decade were favorably affected by legislative reforms, a drop in claims frequency, and market exits from underperforming competitors. While Fitch does not anticipate a precipitous drop in underwriting results for the MPLI industry, near-term softening of rates will promote downward pressure on profitability.

Fitch notes that while TDC's acquisition of FPIC last year is still recent, the integration efforts to date have not encountered any significant issues. The FPIC acquisition will give TDC an opportunity to better compete primarily in Florida and Texas.

TDC reported a statutory calendar year and accident year combined ratio of 103.1% and 103.3% respectively for first half 2012 compared to full year 2011 calendar and accident year combined ratios were 87.7% and 106.4% respectively.

Fitch notes that TDC's calendar year underwriting results have been influenced by sizeable favorable reserve development for several years and thus analyzes underwriting results more so on an accident year basis to reduce the influence of reserve development when looking at profitability.

Within Fitch's rating rationale are multiple rating triggers. If TDC were to materially deviate from any of these items, especially for an extended period, the ratings could be affected.

Fitch believes that a ratings upgrade in the near term is less likely given the company's narrow product focus in a highly volatile line of business.

The following is a list of triggers that could lead to a downgrade:

-- An increase in the company's operating leverage, as defined by net written premiums to policyholder surplus, of 1.0x or higher.

-- Material adverse reserve development.

-- Failure to maintain pricing discipline in a softening rate environment.

Fitch has affirmed the 'A' IFS ratings of the following TDC insurance subsidiaries with a Stable Outlook:

-- Doctors Company, An Interinsurance Exchange;

-- Professional Underwriters Liability Insurance Company (PULIC);

-- Underwriter for the Professions Insurance Company (UPIC);

-- OHIC Insurance Company (OHIC);

-- SCPIE Indemnity Company

-- American Physicians Capital Inc

-- First Professional Insurance Company

-- Anesthesiologists Professional Assurance Company

-- Intermed Insurance Company

-- Advocate MD Insurance of the Southwest, Inc.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

-- 'Insurance Rating Methodology' (Sept. 19, 2012);

Applicable Criteria and Related Research:

Insurance Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=688011

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Fitch, Inc.
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Gerald Glombicki, CPA, [phone]
Director
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Chicago, IL 60602
or
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Managing Director
or
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Source: Fitch Ratings