A.M. Best Places Ratings of Southern Mutual Insurance Company Under Review With Positive Implications
A.M. Best Co. has placed the financial strength rating (FSR) of
A- (Excellent) and issuer credit rating of “a-” of Southern Mutual
Insurance Company (Southern) (Athens, GA) under review with positive
implications following the announcement that the Donegal Mutual
Insurance Company (Donegal) (Marietta, PA) (NASDAQ: DGICA) and
Southern have signed a definitive agreement.
Under the agreement, Donegal would purchase a surplus note of Southern
in the principal amount of $2.5 million and would enter into a quota
share agreement under which Donegal would assume 100% of Southern’s
current in-force and future businesses. Donegal also would assist
Southern with offering additional insurance products and services and
would license to Southern its technology products relating to
underwriting and automated policy issuance. The transaction is expected
to close in fourth quarter 2009.
Southern’s surplus fell from approximately $10 million at year-end 2008
to approximately $6 million as of June 30, 2009, due to significant
underwriting losses from frequent tornado and hail events that fell
within its reinsurance retention. The execution of the agreement
described above will result in a significant boost to Southern’s surplus
base and will offer further surplus relief by effectively eliminating
Southern’s underwriting exposure via the reinsurance agreement with
Donegal, which currently has an FSR of A (Excellent) and an ICR of “a”.
Southern’s ratings will remain under review pending approval of the
agreement from the Georgia Insurance Department.
For Best’s Credit Ratings, an overview of the rating process and rating
methodologies, please visit www.ambest.com/ratings.
The principal methodologies used in determining these ratings, including
any additional methodologies and factors that may have been considered,
can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is a global full-service credit
rating organization dedicated to serving the financial and health care
service industries, including insurance companies, banks, hospitals and
health care system providers. For more information, visit www.ambest.com.
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