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

OLDWICK, N.J.--()--A.M. Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Southern Trust Insurance Company (Southern Trust). The company is domiciled in Macon, GA.

The ratings reflect Southern Trust’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

The negative outlooks reflect increasing underwriting leverage as premium growth continues to outpace surplus growth, as well as ongoing adverse loss reserve development. These metrics indicate the company’s sensitivity to inadequate pricing and reserving is growing, which may negatively impact future balance sheet strength. Additionally, the company experienced a 10% decline in policyholders’ surplus in 2017 reflective of losses from increased storm frequency and severity.

The ratings reflect Southern Trust’s risk-adjusted capitalization being at the strongest level, which partially offsets the negative pressures from the increased underwriting leverage position and unfavorable reserve development; however, negative action may occur should these trends continue. Southern Trust continues to address these concerns with careful selection of new business as it expands its footprint and increases the claims department’s bench strength. Operating performance has been adequate in most years with near breakeven results and 2017 being an outlier. Underwriting volatility has been offset partially by net investment income, which experienced an uptick in 2017 following generally declining trends. Business profile is considered limited based on the company’s narrow geographic focus and relative market position within its operating territory. ERM is considered appropriate for the company’s risk profile.

This press release relates to Credit Ratings 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 see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Contacts

A.M. Best
Christopher Draghi, +1-908-439-2200, ext. 5043
Senior Financial Analyst
chris.draghi@ambest.com
or
Michelle Baurkot, +1-908-439-2200, ext. 5314
Director
michelle.baurkot@ambest.com
or
Christopher Sharkey, +1-908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, +1-908-439-2200, ext. 5644
Director, Public Relations
james.peavy@ambest.com

Contacts

A.M. Best
Christopher Draghi, +1-908-439-2200, ext. 5043
Senior Financial Analyst
chris.draghi@ambest.com
or
Michelle Baurkot, +1-908-439-2200, ext. 5314
Director
michelle.baurkot@ambest.com
or
Christopher Sharkey, +1-908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, +1-908-439-2200, ext. 5644
Director, Public Relations
james.peavy@ambest.com