Ratings agency AM Best has revised the outlook of Vermont-based risk retention group Ophthalmic Mutual Insurance Company's long-term issuer credit rating from stable to negative.
The revision 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.
AM Best suggested underwriting results in earlier years benefited from significant favorable development of prior accident year loss reserves, resulting in strong operating performance in those years.
In recent years, however, margins have compressed 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.
Despite this outlook revision, AM Best affirmed the long-term ICR of a+ and the financial strength of A (Excellent) for the risk retention group.
The ratings reflect OMIC’s balance sheet strength, which AM Best categorises as strongest, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.