SCPIE Companies Downgraded Following Loss
By Gary Mogel
NU Online News Service, Nov. 17, 2:05 p .m. EDT?One of California’s largest medical malpractice insurers has received a lower financial strength rating following its report of a third-quarter loss and investment write-down.
A.M. Best Co., based in Oldwick, N.J., has downgraded the financial strength rating of the Los Angeles, Calif.-based SCPIE Companies to “B” (Fair) from “B-plus” (Very Good).
Best said in a statement the downgrade followed a reported net loss of $14.8 million in the third quarter of 2003. Best also noted that SCPIE had an adverse reserve development of $8.5 million on its assumed reinsurance business. Additionally, Best mentioned the company’s $9.6 million write-down of an equity investment in Lloyd’s Syndicate 102, which was placed in run-off in October.
“While we are disappointed in the Best rating action and our third-quarter results, we remain confident that the measures we have implemented over the past two years will result in a return to profitability and a stronger balance sheet,” said Donald J. Zuk, SCPIE’s chief executive officer and president.
SCPIE spokesperson Howard Bender said that those measures include “concentrating on SCPIE’s California book of business and getting out of noncore states.” Mr. Bender identified those states as Connecticut, Florida, Georgia and Texas.
“We also discontinued our reinsurance division,” Mr. Bender added. In December 2002, SCPIE sold its reinsurance business to GoshawK Re, which is owned by GoshawK Holdings plc, the same company that owns the Lloyd’s Syndicate 102 that is in run-off.
According to A.M. Best analyst Angela Quinn, there is expected to be only a “limited impact” on GoshawK Re’s “A-minus” rating from the Syndicate 102 run-off because of the limited liability of the syndicate’s operations.
“This rating action does acknowledge the group’s re-underwriting initiatives implemented as a means to restore and sustain operating profitability and overall balance-sheet strength over the mid-term,” Best pointed out. However, Best stated that it “remains concerned with the adequacy of loss reserves and marginal overall capitalization.”
Mr. Zuk of SCPIE added that inadequate rates were partially to blame for the adverse developments and that SCPIE has filed for an overall 8.9 percent rate increase with the California Department of Insurance.