[March 08, 2013]

A.M. Best Revises Outlook to Positive for Issuer Credit Rating of Medical Mutual Insurance Company of North Carolina

A.M. Best Co. has revised the issuer credit rating (ICR) outlook to positive from stable and affirmed the financial strength rating (FSR) of A (Excellent) and ICR of "a" of Medical Mutual Insurance Company of North Carolina (Medical Mutual). The outlook for the FSR is stable.

Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and ICR of "a" of Medical Mutual's subsidiary, Medical Security Insurance Company (Medical Security). The outlook for these ratings is stable. Both companies are domiciled in Raleigh, NC.

The rating actions reflect Medical Mutual's excellent balance sheet capitalization, long-term favorable operating performance and its leadership position in its core markets. Additional factors supporting the ICR's positive outlook include the company's history of underwriting performance, historically favorable reserve development and its dedication to loss prevention. Also supporting the revised outlook is the breadth and depth of Medical Mutual's enterprise risk management program. The ICR outlook also is based on A.M. Best's expectation of continued excellent operating performance across multiple facts of Medical Mutual.

Partially offsetting these favorable rating factors are the inherent risks to Medical Mutual being a medical professional liability carrier, particularly as it relates to price competition, tort reform, loss cost trends and regulatory challenges. Medical Mutual remains concentrated in this highly cyclical market.

Issues that could lead to positive ratings actions for Medical Mutual include continued strong operating earnings or growth in capitalization levels. The ratings could be downgraded or the outlooks revised if the company experienced upward shifts in claim frequency and severity patterns or changes in the legislative and judicial environment.

The affirmation of the ratings of Medical Security is based on its strong capitalization and favorable operating experience. An additional factor supporting the company's ratings is the relationship between Medical Security and Medical Mutual, which includes an excess of loss reinsurance agreement.

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. Key criteria utilized include: "Risk Management and the Rating Process for Insurance Companies"; "Understanding BCAR for Property/Casualty Insurers"; and "Rating Members of Insurance Groups." Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

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