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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MAY 03, 2011 12:00 AM (EDT)
A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating of A- (Excellent) and issuer credit rating of "a-" of American Surety Company (ASC) (Indianapolis, IN).
The negative outlook reflects the deterioration in ASC's underwriting results coupled with stagnating growth in surplus over the last two years. The deterioration in the company's underwriting results was driven by premium volume declining at a faster rate relative to the decline in underwriting expenses, as well as increases in incurred losses. Although ASC has consistently produced net underwriting income through market cycles due to historically low loss experience, net underwriting income turned slightly negative during 2010. While pretax operating income remained positive, operating returns have significantly weakened relative to other bail sureties in recent years.
The affirmation of the ratings reflects ASC's adequate level of capitalization, generally profitable underwriting and operating performance and niche market position within the bail bond market.
The principal methodology used in determining these ratings is Best's Credit Rating Methodology - Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best's rating process and highlights the different rating criteria employed. Additional key criteria utilized include: "Risk Management and the Rating Process for Insurance Companies" and "Understanding BCAR for Property/Casualty Insurers." Methodologies can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.