AM Best

A.M. Best Upgrades Issuer Credit Rating of Sterling Insurance Company


Bob Podolski

Senior Financial Analyst

(908) 439-2200, ext. 5731

Gary Davis

Assistant Vice President

(908) 439-2200, ext. 5665

Rachelle Morrow

Senior Manager, Public Relations

(908) 439-2200, ext. 5378

Jim Peavy

Assistant Vice President, Public Relations

(908) 439-2200, ext. 5644


OLDWICK, N.J. - SEPTEMBER 11, 2012 12:00 AM (EDT)
A.M. Best Co. has upgraded the issuer credit rating to “a+” from “a” and affirmed the financial strength rating of A (Excellent) of Sterling Insurance Company (Sterling) (Cobleskill, NY). The outlook for both ratings is stable.

The rating actions reflect Sterling’s solid risk-adjusted capitalization and continued favorable operating performance as well as its long-standing local market presence. Sterling’s solid capital position has been derived from a double-digit compound average annual growth in surplus over the latest five-year period, driven by net underwriting gains in each of the last five years, supplemented by generally steady net investment and other income. The profitable underwriting results have enabled the company to record consecutive years of double-digit pre-tax returns on revenue. Contributing to Sterling’s favorable operating performance profitability has been management’s strict adherence to its underwriting guidelines and pricing discipline.

Partially offsetting these positive rating factors is Sterling’s geographic risk concentration in New York, which exposes its operating performance to weather-related events, as well as changes in regulatory and competitive market conditions. However, the company’s catastrophe reinsurance coverage reduces the impact on surplus of a storm with a 100-year return period based on a modeled probable maximum loss to a manageable level of surplus. Also, the company’s underwriting expense ratio is above the personal property composite average, primarily driven by higher commission rates.

There could be pressure on Sterling’s ratings if its favorable operating performance is reversed or if its risk-adjusted capitalization were to weaken.

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”; “Understanding BCAR for Property/Casualty Insurers”; “Equity Credit for Hybrid Securities”; and “Catastrophe Analysis in A.M. Best Ratings.” Best’s Credit Rating Methodology can be found at

Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source.

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AMB# Company Name
000872 Sterling Insurance Company