AM Best Revises Issuer Credit Rating Outlook to Negative for Ophthalmic Mutual Insurance Company (A Risk Retention Group)

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

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

The revised Long-Term ICR outlook reflects the reduction in underwriting and operating performance in 2017 and 2018 and the challenges that OMIC faces to improve results in the near term. Underwriting results in earlier years benefited from significant favorable development of prior accident year loss reserves, resulting in strong operating performance in those years. However, margins have compressed in recent years following the impacts of a rate decrease in 2016 and rising severity, as well as slight adverse development in 2017 and 2018, which placed the company’s profitability more in line with its peers. However, we emphasize that despite the recent underwriting results, OMIC’s risk-adjusted capitalization remains at the strongest level.

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