Best’s News & Research Service - February 12, 2014 04:47 PM (EST)
A.M. Best Downgrades Ratings of Southern Trust Insurance Company
Oldwick //BestWire// - A.M. Best Co. has downgraded the financial strength rating to A- (Excellent) from A (Excellent) and issuer credit rating to "a-" from "a" of Southern Trust Insurance Company (Southern Trust) (Macon, GA). The outlook for both ratings has been revised to stable from negative.
The rating downgrades reflect Southern Trust's trend of volatile underwriting performance over the past five years. The company's above average underwriting expense ratio caused its combined ratio to exceed the composite average. In addition, weather-related losses impacted Southern Trust's profitability.
In spite of the negative underwriting results, Southern Trust maintains strong risk-adjusted capitalization, which is derived from its average underwriting leverage, favorable reserve development trends and conservative investment risk. Somewhat tempering policyholders' surplus growth has been a recent payment of dividends to the company's intermediate holding company parent, Southern Trust Corporation. Southern Trust maintains long-standing agency relationships and possesses a local market expertise in its leading state of Georgia.
Further negative rating actions could occur if Southern Trust's financial results significantly deviate from management's expectations over several periods or a material decline in risk-adjusted capitalization were to occur.
Positive rating actions could result from a sustained material improvement in the company's underwriting performance that exceeds the composite average while maintaining strong risk-adjusted capitalization.
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. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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