Best’s News & Research Service - March 13, 2015 03:07 PM (EDT)
A.M. Best Downgrades Ratings of Southern General Insurance Company
- March 13, 2015 03:07 PM (EDT)
Oldwick //BestWire// - A.M. Best has downgraded the financial strength rating to B- (Fair) from B (Fair) and the issuer credit rating to "bb-" from "bb" of Southern General Insurance Company (SGIC) (Marietta, GA). The outlook for both ratings is negative.
The downgrade reflects SGIC's declining policyholder surplus and risk-adjusted capitalization as a result of continuing pre-tax operating losses over the latest five-year period. This negative operating performance was driven by the company's persistent underwriting losses resulting from its elevated expense structure, property catastrophe losses in 2009 and adverse loss reserve development. Additional negative rating factors include elevated underwriting leverage and low liquidity ratios that unfavorably compare with the private passenger non-standard auto composite. The company's profile also includes limited product offerings, geographic concentration and a competitive local marketplace that subject SGIC's earnings to potential adverse weather-related events and judicial, legislative and regulatory actions. While the negative outlook reflects the uncertainty that management's initiatives will successfully return the company to operating profitability over the intermediate term, SGIC's operating results have significantly improved in 2014, though still negative, compared to the prior years of operating profitability. The substantial improvement to operating results in 2014 are based on product and pricing improvements, technology enhancements and aggressive expense management actions over the course of the prior three years.
There may be potential future negative rating actions if SGIC fails to execute its plans and continues to report operating losses, further eroding policyholders' surplus and risk-adjusted capitalization as measured by Best's Capital Adequacy Ratio.
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:
- Catastrophe Analysis in A.M. Best Ratings
- Insurance Holding Company and Debt Ratings
- Risk Management and the Rating Process for Insurance Companies
- Understanding BCAR for Property/Casualty Insurers
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 .
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.