A.M. Best Revises Outlook to Negative for Southern Trust Insurance Company

OLDWICK, N.J.--(BUSINESS WIRE)-- 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 Southern Trust Insurance Company(Southern Trust) (Macon, GA).

The revision of the outlook to negative reflects Southern Trust’s negative underwriting income in recent years, driven not only by significant weather-related losses but also an elevated expense ratio that on a five-year basis, considerably exceeds the private passenger auto and homeowners composite. In addition, Southern Trust’s business concentration creates exposure to ongoing weather-related losses.

In spite of the negative underwriting results, Southern Trust maintains strong risk-adjusted capitalization, which is derived from its conservative operating strategies, favorable reserve development and conservative investment risk. In addition, Southern Trust maintains long-standing agency relationships and possesses local market expertise in its leading state of Georgia.

Future rating downgrades could result if there is continued deterioration in underwriting performance or a significant erosion of Southern Trust’s capital base. Removal of the negative outlook would include, but is not limited to, several years of improved underwriting performance while maintaining strong risk-adjusted capitalization.

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”; “Understanding BCAR for Property/Casualty Insurers”; and “Catastrophe Analysis in A.M. Best Ratings.” 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. For more information, visit www.ambest.com.

Copyright © 2011 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.

A.M. Best Co.
Frederick DeLeon
Senior Financial Analyst
908-439-2200, ext. 5175
frederick.deleon@ambest.com
or
Rick Decker
Assistant Vice President
908-439-2200, ext. 5423
rick.decker@ambest.com
or
Rachelle Morrow
Senior Manager, Public Relations
908-439-2200, ext. 5378
rachelle.morrow@ambest.com
or
Jim Peavy
Assistant Vice President, Public Relations
908-439-2200, ext. 5644
james.peavy@ambest.com

Source: A.M. Best Co.