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Rating Action on ProAssurance

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Recently, A.M. Best Co. raised the issuer credit rating (ICR) of ProAssurance Corp. (PRA - Free Report) to “a-” from “bbb+.” Additionally, the rating agency increased the indicative debt rating under the shelf registration to “a-” from “bbb+” on the senior unsecured debt, “bbb+” from “bbb” on the subordinated debt and “bbb” from “bbb-” on the preferred stock.

Further, A.M. Best upgraded the ICR of 3 subsidiaries of ProAssurance – ProAssurance Casualty Company, ProAssurance Indemnity Company, Inc. and ProAssurance Specialty Insurance Company, Inc. (ProAssurance Group) – to “aa-” from “a+” and their financial strength rating (FSR) to “A+” from “A.” The outlook on all the above-mentioned ratings was changed to stable from positive.

A.M. Best also raised the ICR of 2 other subsidiaries of ProAssurance – Medmarc Casualty Insurance Company and Noetic Specialty Insurance Company – to “a” from “a-” and their FSR to “A” from “A-”. Moreover, the outlook for these companies was changed to stable from under review with positive implications.

Additionally, A.M. Best affirmed the FSR and ICR of Podiatry Insurance Company of America at “A” and “a”, respectively, and those of PACO Assurance Company, Inc. at “A-” and “a-,” respectively. The outlook for these subsidiaries of ProAssurance was affirmed at stable.

The upward revision on ProAssurance Group’s ratings was driven by its strong capital base, sustained trend of operating profitability, sturdy business profile, favorable underwriting result, strong market position, diverse business lines and well established enterprise risk management programs and policies. The outlook for the group was based on the anticipation of a continuation in the trend of strong operating results throughout the organization.

The ratings of Medmarc and Noetic were raised on the back of strong capitalization, operating profitability, market leading position in the medical device product liability segment, and the operational and financial support provided by the holding company, ProAssurance, as well as the ProAssurance Group.

Further, the ratings took into consideration the financial flexibility that ProAssurance provides to all its subsidiaries. The holding company’s conservative financial leverage, sturdy interest coverage ratio and ample levels of free cash and short-term investments also supported the rating action.

Rating affirmations or upgrades from credit rating agencies play an important part in retaining investor confidence in the stock as well as maintaining credit worthiness in the market. We believe that the strong ratings will help ProAssurance retain investor confidence and help it write more businesses going forward, thereby boosting its results.

ProAssurance currently carries a Zacks Rank #2 (Buy). Other property and casualty companies worth considering are Alleghany Corporation (Y), American Safety Insurance Holdings Ltd. (ASI) and Catlin Group Ltd. (CLNGF). All these companies carry a Zacks Rank #1 (Strong Buy).

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