AM Best has downgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “a” from “a+” and affirmed the Financial Strength Rating (FSR) of A (Excellent) of Ophthalmic Mutual Insurance Company (A Risk Retention Group) (OMIC) (Burlington, VT). The outlook of the Long Term ICR has been revised to stable from negative while the outlook of the FSR is stable.

The ratings reflect OMIC’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

AM Best has affirmed OMIC’s FSR of A, while at the same time recognizing the company’s adequate operating performance. The company benefits from its neutral business profile and market position, with a good spread of geographic risk, despite its concentration in one specialty segment. Additionally, AM Best is revising the Long-Term ICR outlook to stable from negative. OMIC continues to possess the strongest level of capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), historically favorable reserve development and high reserve releases, leading to a positive net income over an extended period of operation. OMIC’s profitability also is bolstered by net investment income that outpaces its peers, resulting in consistent annual surplus growth. However, the exceptional level of favorable development has come down in recent years, and a handful of high severity claims unrelated to COVID-19 has driven some net underwriting losses.

As some prior years’ development affected operating performance metrics during 2016 through 2019, the primary driver was a 12.9% rate decrease. Without the significant decrease in rate, ratios would have remained strong. The RRG has since added back over 14% in rate increases and results are projected to be in line with its peers for the intermediate term.

OMIC has had very few unfavorable plaintiffs’ judgments and is not susceptible to the same high frequency and severity afflictions facing most carriers in the medical professional liability segment. However, OMIC’s pediatric segment can lead to very high claims, which have produced fluctuating operating results and led to some volatility. OMIC’s operating performance places the RRG comfortably at the adequate level – in line with the majority of the medical professional liability segment, as well as the company’s mission to serve its customers.

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