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United States : A.M. Best Upgrades Issuer Credit Rating of Sterling Insurance Company.

A.M. Best Co. has upgraded the issuer credit rating to a+ from a and affirmed the financial strength rating of A (Excellent) of Sterling Insurance Company (Sterling) (Cobleskill, NY). The outlook for both ratings is stable.

The rating actions reflect Sterling s solid risk-adjusted capitalization and continued favorable operating performance as well as its long-standing local market presence. Sterling s solid capital position has been derived from a double-digit compound average annual growth in surplus over the latest five-year period, driven by net underwriting gains in each of the last five years, supplemented by generally steady net investment and other income. The profitable underwriting results have enabled the company to record consecutive years of double-digit pre-tax returns on revenue. Contributing to Sterling s favorable operating performance profitability has been management s strict adherence to its underwriting guidelines and pricing discipline.

Partially offsetting these positive rating factors is Sterling s geographic risk concentration in New York, which exposes its operating performance to weather-related events, as well as changes in regulatory and competitive market conditions. However, the company s catastrophe reinsurance coverage reduces the impact on surplus of a storm with a 100-year return period based on a modeled probable maximum loss to a manageable level of surplus. Also, the company s underwriting expense ratio is above the personal property composite average, primarily driven by higher commission rates.

There could be pressure on Sterling s ratings if its favorable operating performance is reversed or if its risk-adjusted capitalization were to weaken.

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Publication:Mena Report
Date:Sep 12, 2012
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