S&P Downgrades A.P. Assurance
NU Online News Service, Nov. 7, 3:35 p.m. EST?Standard & Poor's Ratings Services has lowered its counterparty and financial strength ratings for American Physicians Assurance Corp. to "triple-B-plus" from "A-minus" and put the company on Credit Watch with "negative" implications.
The New York-based S&P's decision, released today, was triggered by a disclosure from American Physicians Capital Inc.?the parent company of American Physicians Assurance?that the insurer would take a $43 million charge for reserve strengthening and an additional charge for eliminating a deferred tax asset.
The company said it would delay releasing its quarterly earnings results, originally scheduled Nov. 6 to Nov. 12.
The insurer also is planning to exit from its health care and workers' compensation businesses, which the company said it will further explain when the earnings are announced next week.
Regarding the downgrade, Shellie Stoddard, a credit analyst at S&P, said that announced reserve charges from the insurer were not in line with the rating agency's prior expectations. S&P, she said, had expected that the company was adequately reserved and that it would begin to turn around its operations through corrective rating actions.
S&P stated that the holding company has already raised some $50 million in capital this year, through its participation in trust-preferred pools. But $10 million has already been contributed to its American Physicians Assurance unit.
The ratings firm said it will have a discussion with American Physicians Assurance management at some time over the next two weeks. They will discuss the availability of additional sources of contributions for the insurer or other actions the company may take to stabilize capital and reserves.
Commenting on the company's reserve charge and the delay in reporting earnings, William Cheeseman, chief executive officer at American Physicians Capital, stated, "We are obviously disappointed in this development and hope to be able to report the specific and significant magnitude of our loss as soon as possible, but at present, we are focused on getting the correct and accurate information and completing actuarial analysis."
Headquartered in East Lansing, Mich., American Physicians Capital Inc. is a national provider of medical professional liability coverage through its main subsidiary American Physicians Assurance and its other units.
Offering coverage in 14 states, including Florida, Michigan, Illinois, Ohio and Virginia, the company recorded $266.2 million in direct written premium, with a net loss of $18.5 million, for 2002.
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