Minnesota Lawyers Mutual Insurance Company and Subsidiaries - Page 8

            petitioner’s pricing and reserving are “conservative by industry                           
            standards”.  The 1994 and 1995 Best reports also state:                                    
            “Somewhat offsetting these positive rating factors is a                                    
            concentration of underwriting risk as the company is primarily a                           
            one state, one line writer and is subject to changes in insurance                          
            regulation and judicial climate."                                                          
                  The 1995 Best report states:                                                         
                        Favorable underwriting gains continued for the                                 
                  tenth consecutive year in 1995, despite a high                                       
                  frequency claim year.  Underwriting income benefitted                                
                  from the take down of approximately $3 million of                                    
                  redundant reserves from prior report years.  This                                    
                  reduction has been a consistent pattern since 1987.                                  
                  [Emphasis added.6]                                                                   
                  Additionally, in regard to petitioner's reserve quality, the                         
            1995 Best report concludes:                                                                
                        The company's carried loss reserve position is                                 
                  strong, with significant accident year redundancies                                  
                  recorded over the last ten years reflective of the very                              
                  conservative reserving practices and commitment to                                   
                  reserve adequacy.  Management believes that                                          
                  professional liability is a very volatile line of                                    
                  business, so they reserve very conservatively in the                                 
                  early years of development and retire any redundant                                  
                  reserves after claims are more seasoned and                                          
                  predictable.  Given the volatility and the low                                       
                  mathematical credibility of the company's development                                
                  patterns this course of action insures that reserves                                 
                  set aside by report year will be adequate to cover                                   
                  future development.  Therefore, despite annual                                       
                  reductions on old report years, the company continues                                
                  to be very conservatively reserved.  [Emphasis added.]                               

                  6 Similarly, the 1994 Best report states: “Bulk reserves on                          
            years prior to 1994 which were deemed redundant were reduced by                            
            $1.7 million last year.  This take down of reserves has been a                             
            consistent pattern since 1987.”  (Emphasis added.)                                         

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