A.M. Best Downgrades Ratings of Southern General Insurance Co.

A.M. Best has downgraded the financial strength rating to B- (Fair) from B (Fair) and the issuer credit rating to “bb-” from “bb” of Southern General Insurance Co. (SGIC) of Marietta, Ga. The outlook for both ratings is negative.

The downgrade reflects SGIC’s declining policyholder surplus and risk-adjusted capitalization as a result of continuing pre-tax operating losses over the latest five-year period.

This negative operating performance was driven by the company’s persistent underwriting losses resulting from its elevated expense structure, property catastrophe losses in 2009 and adverse loss reserve development. Additional negative rating factors include elevated underwriting leverage and low liquidity ratios that unfavorably compare with the private passenger non-standard auto composite.

The company’s profile also includes limited product offerings, geographic concentration and a competitive local marketplace that subject SGIC’s earnings to potential adverse weather-related events and judicial, legislative and regulatory actions.