Best’s News & Research Service - December 03, 2014 03:26 PM (EST)
A.M. Best Downgrades Ratings of Sutter Insurance Company
Oldwick //BestWire// - A.M. Best has downgraded the financial strength rating to B++ (Good) from A- (Excellent) and the issuer credit rating to "bbb+" from "a-" of Sutter Insurance Company (Sutter) (Petaluma, CA). The outlook for both ratings has been revised to stable from negative.
The rating downgrades primarily reflect Sutter's volatile operating results due to a continuing unfavorable underwriting performance trend over the past five years and through the first three quarters of 2014. The results have been impacted by adverse loss experience in certain lines of business, coupled with a historically elevated underwriting expense structure. Sutter's risk-adjusted capitalization, while remaining supportive of the ratings, has also deteriorated in recent years.
The ratings and the revised outlooks reflect Sutter's solid, but declining, level of risk-adjusted capitalization, moderate underwriting leverage and sound balance sheet liquidity. In addition, management has ongoing initiatives to improve its overall financial results. These positive rating attributes are offset by Sutter's underwriting volatility and geographic concentration of risk. Furthermore, as a predominantly California writer with limited market penetration, Sutter is subject to competitive pressures from other multi-line carriers.
Negative rating actions could occur if there is a continuation of operating losses leading to a decline in risk-adjusted capitalization. Positive rating actions may result from Sutter executing its business plan over the long term, along with consistent positive operating performance with minimal volatility.
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.
Key insurance criteria reports utilized:
- Risk Management and the Rating Process for Insurance Companies
- Understanding BCAR for Property/Casualty Insurers
- Catastrophe Analysis in A.M. Best Ratings
This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best's Ratings & Criteria Center.
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