The Southern General Insurance Co. Suffers Recent Downgrade

The Southern General Insurance Co. of Marietta, Georgia, recently suffered a credit rating downgrade at the hands of insurance-ratings stalwart A.M. Best. The A.M. Best Co. downgraded the Southern General Insurance firm based on continued losses in recent years.

“The rating actions reflect SGIC’s continued operating losses in 2011 and the first nine months of 2012, which resulted in combined and operating ratios that compare unfavorably with results for the private passenger non-standard composite,” said A.M. Best officials in a release. “Additionally, SGIC policyholders’ surplus and risk-adjusted capitalization declined as a result of poor operating performance and a significant adjustment to premium receivables from its managing general agent, The Insurance House, Inc. The company’s negative operating losses resulted from a trend of underwriting losses driven by inadequate rates, increased claim severity that led to adverse prior year loss reserve development, increased competitive market conditions and an elevated expense structure.”

To offset its downward trend, officials for Southern General undertook an aggressive plan to turn around company finances and boost sales. The results are yet to be reported, but A.M. Best officials remain cautious.

“In response to declining operating trends, SGIC has taken aggressive actions to reduce expenses, optimize territorial rates, withdraw from South Carolina and launch a new point-of–sale technology program,” said A.M. Best. “Partially offsetting these negative rating factors is SGIC’s adequate risk-adjusted capitalization and long-standing agency relationships and local market presence. Although SGIC’s FSR outlook is stable, there may be potential future negative rating actions, if it fails to execute on its recovery plans and continues to report operating losses, which further erodes 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. Key criteria utilized include: Risk Management and the Rating Process for Insurance Companies; Understanding BCAR for Property/Casualty Insurers; Catastrophe Analysis in A.M. Best Ratings; and Evaluating Non-insurance Ultimate Parents.

Founded in 1899, the A.M. Best Co. is the world’s oldest and most authoritative insurance rating and information source. The Southern General Insurance Co. is a fire and casualty insurance company founded in 1979 and based in Atlanta. Fire and casualty companies help protect homes and businesses against the potential loss from a fire or liability from a potential accident.

Fire and casualty insurance companies are similar to property and casualty insurance companies, only they protect against more specialized perils, such as fire. Fire can be caused by a great deal of risks, from lightning to electrical issues to outright criminal acts of arson. But a fire and casualty insurance plan can help protect homes and businesses if a fire should break out and casualties result, inflicting a great deal of physical, emotional and financial pain for all involved. But a quick payout to indemnify against potential loss can make at least the financial burden less of a problem for many. By Mike Heuer