OLDWICK, N.J.--(BUSINESS WIRE)--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.
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