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FOR IMMEDIATE RELEASE
OLDWICK - FEBRUARY 24, 2016 02:45 PM (EST)
A.M. Best has revised the outlook to negative from stable and affirmed the financial strength rating (FSR) of B++ (Good) and the issuer credit rating (ICR) of “bbb” of Stonetrust Commercial Insurance Company (Stonetrust) (Baton Rouge, LA).
The revision of the outlook to negative reflects the sizeable deterioration of risk-adjusted capitalization within the year, mainly driven by adverse reserve development on previous accident years. The decline in risk-adjusted capitalization is further accentuated by the company’s mono-line concentration risk in the workers’ compensation sector as it relates to pricing and market competition.
The ratings for Stonetrust reflect its historically favorable operating and underwriting performance which outperform the industry composite due to the experience within its niche workers’ compensation space. Stonetrust provides workers’ compensation coverage predominantly in Louisiana and Oklahoma and has developed strong agency relationships. Disciplined underwriting and the application of loss control initiatives have enabled the company to deliver solid underwriting performance and favorable operating cash flows.
Partially offsetting these positive factors is the company’s concentrated business risk as it operates as a mono-line writer within a limited geographic spread, exposing operations to local regulatory and economic changes. An additional offsetting factor is the variability in the development of loss reserving trends.
Future negative rating actions could ensue if operating performance falls markedly short of A.M. Best expectations or if the company’s risk-adjusted capitalization deteriorates further. A return to stable outlook would occur if Stonetrust’s risk-adjusted capitalization increases and reserve development stabilizes.
This press release relates to rating(s) 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.
A.M. Best is the world’s oldest and most authoritative insurance rating and information source.