This action reflects the decline in surplus recorded in the third quarter of 2004 due to significant catastrophe activity and the deteriorated risk-adjusted capitalization of its affiliate, Southern Family Insurance Company.
Accordingly, A.M. Best believes the overall financial flexibility of the organization has been negatively impacted. Management is currently pursuing a number of strategic initiatives to stabilize risk- adjusted capitalization. The final rating outcomes will depend on the success of these initiatives. In the absence of improved risk-adjusted capitalization, the ratings would likely be downgraded.
The ratings will remain under review pending improvement in the company's capitalization, further discussions with management as well as an in-depth analysis of its strategic plan.