Fitch maintains The Doctors Company Group’s ratings following acquisition news

Investing.com -- Fitch Ratings has confirmed the ’A’ (Strong) Insurer Financial Strength (IFS) ratings of The Doctors Company, An Inter-Insurance Exchange and its wholly owned insurance subsidiaries, collectively known as The Doctors Company Group (TDC). This decision comes after TDC announced plans to acquire ProAssurance (NYSE:PRA) Corporation (PRA, not rated). Fitch has also maintained TDC’s surplus note at ’BBB’. The Rating Outlook remains Stable.

Fitch believes that TDC’s acquisition of PRA aligns with the company’s operational strategy and core business. PRA primarily provides medical professional liability insurance, along with workers’ compensation insurance. The acquisition is expected to enhance TDC’s scale and solidify its position as a leading medical professional liability insurance (MPLI) carrier.

The transaction is expected to conclude in mid-2026, pending regulatory approvals. TDC plans to pay approximately $1.3 billion, which is roughly the book value of PRA’s equity, adjusted for unrealized bond losses. The acquisition will be financed by the sale of invested assets at TDC.

Fitch noted that pro forma metrics for TDC align with previously established rating sensitivities. Although the metrics meet rating expectations, there is less room for adverse deviation, which will increase over time as the company grows capital. Fitch will closely monitor pro forma capital, particularly assessing the combined companies under its Prism capital model, alongside other capital metrics such as financial leverage and risk-based capital.

Fitch will also monitor the operating performance of both companies until the transaction closes, focusing on any weakness in company profile and operating performance or deterioration in reserve adequacy.

The MPLI segment is dominated by monoline specialty insurers operating with limited geographic scope. These companies tend to have strong capital positions and limited options to write business outside of MPLI. This market dynamic hinders a return to segment rate adequacy and underwriting profits. Excess capital among MPLI specialists is likely to be remedied by underwriting losses and, ultimately, market consolidation. TDC’s MPLI market position provides a platform for future acquisitions.

Rating sensitivities include factors that could lead to a downgrade, such as a sustained Prism capital model score below ’Very Strong’, an increase in operating leverage, material adverse reserve development, or a sustained increase calendar year combined ratio of 109% or higher. Conversely, factors that could lead to an upgrade include surplus notes ratings being upgraded by one notch if financial leverage at the operating company is 15% or less, and a significant expansion in TDC’s market position and scale through profitable growth and diversification of business risk.

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