AM Best


A.M. Best Downgrades Ratings of Attorneys' Liability Assurance Society, Inc., A Risk Retention Group


CONTACTS:

Daniel Teclaw
Senior Financial Analyst
(908) 439-2200, ext. 5394
dan.teclaw@ambest.com

Charles M. Huber
Managing Senior Financial Analyst
(908) 439-2200, ext. 5122
charles.huber@ambest.com
Christopher Sharkey
Manager, Public Relations
(908) 439-2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

OLDWICK - FEBRUARY 26, 2015 02:32 PM (EST)
A.M. Best has downgraded the financial strength rating to A- (Excellent) from A (Excellent) and the issuer credit rating to "a-" from "a" of Attorneys' Liability Assurance Society, Inc., A Risk Retention Group (ALAS) (Burlington, VT). The outlook for both ratings remains stable.

The downgrade of the ratings is reflective of the company's weaker overall earnings in recent years. Adverse loss reserve development on prior accident year claims has resulted in higher than expected underwriting losses. The company has a concentration of underwriting risk in the legal professional liability lines (LPL), which is characterized by low frequency and high severity claims and a higher level of volatility in underwriting and operating performance. The current ratings reflect the organization's supportive capitalization and strong business profile with a competitive advantage in the LPL line of business; a clearly defined and actionable enterprise risk management program focused on loss prevention that is a ratings strength; and effective use of reinsurance. ALAS benefits from its long-term association with its members and geographic diversification, as well as a reinsurance structure that affords it a competitive benefit of writing coverage for larger law firms with limits up to $75 million while retaining less than $25 million.

Partially offsetting these positive rating factors, in addition to the concentration of exposure to low frequency, high severity risks, are the inherent risks of underwriting insurance coverage within the LPL sector, as well as competition for market share. In addition, the low interest rate environment and declining average annual investment yields places greater pressure on underwriting performance.

The stable outlook reflects A.M. Best's observations that ALAS' operating profitability appears to be stabilizing based on recent claims trends and that it is satisfactorily capitalized to support its insurance risks. Negative rating actions could occur if volatility in underwriting persists and drives operating losses to significantly weaken risk-adjusted capitalization. Positive rating actions could occur if ALAS demonstrates a prolonged period of stable underwriting results contributing to organic surplus growth and stronger risk-adjusted capitalization.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:


  • Risk Management and the Rating Process for Insurance Companies

  • Understanding BCAR for Property/Casualty Insurers

This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best's Ratings & Criteria Center.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.


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AMB# Company Name
012007 Attorneys' Liab Assr Society, Inc, A RRG