[February 01, 2013]

A.M. Best Revises Outlook to Positive on Issuer Credit Rating of Eastern Dentists Insurance Company (A Risk Retention Group)

A.M. Best Co. has revised the issuer credit rating (ICR) outlook to positive from stable and affirmed the financial strength rating (FSR) of B++ (Good) and ICR of "bbb" of Eastern Dentists Insurance Company (A Risk Retention Group) (EDIC) (Burlington, VT). The outlook for the FSR is stable.

The rating actions reflect EDIC's continuing favorable operating results and improved capitalization. This has been driven by profitable underwriting performance, including maintaining pricing discipline and favorable development on loss reserves that have continued to benefit from positive trends in loss frequency and severity.

The ratings of EDIC reflect its excellent capitalization, history of consistently improving underwriting results and operating profitability, as well as the generation of non-risk-bearing fee income. These favorable rating attributes are partially offset by the company's market profile, which is characterized by a concentration of risks associated with being a monoline writer of dental professional liability insurance. As such, it may be affected by previously unexpected adverse claim trends in dental practices as well as changes in the legal, regulatory and judicial environments affecting its professiona liability line.

EDIC is the leader in providing professional liability coverage to dentists in Massachusetts and writes business in all other states in the Northeast as well as Virginia. Recently, the company acquired renewal rights for business in North Carolina. Though this will generate increased revenues and enhance geographic diversification, the potential for increased leverage on capital will need to be monitored.

The outlooks for the ratings of EDIC are based on the maintenance of supportive capitalization and favorable operating performance while focusing on rate adequacy and prudent underwriting in its growth markets and establishing adequate loss reserves.

The ratings could be downgraded and the outlooks for the ratings could be revised if EDIC were to develop an adverse underwriting performance due to a significant accumulation of claims and inadequate loss reserves or over-aggressive growth.

Positive rating actions for EDIC could result from continued long-term favorable performance on both an underwriting and operating basis, the consistent generation of surplus and maintenance of strong capitalization, as well as successful execution of any growth plans.

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" and "Understanding BCAR for Property/Casualty Insurers." 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.

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