S&P Lowers Southern Group Indemnity Inc. Rtg to 'Bpi'

    NEW YORK--Standard & Poor's--March 22, 2001--Standard & Poor's today lowered its financial strength rating on Southern Group Indemnity Inc. (SGI) to single-'Bpi' from double-'Bpi'. Key rating factors include a worsening operating ratio, dependence on surplus notes and reinsurance, and limited operating scope.
    Based in Miami, Florida, SGI (NAIC: 41700) writes mainly private passenger auto liability and commercial auto liability with a specialization in nonstandard automobile. All of the company's business is in its only licensed state, Florida. SGI employs an affiliate (Statewide Adjusters Inc.) to adjust all private passenger auto claims and an affiliated managing general agent (Southern Group Insurance Management Inc.) to underwrite all private passenger auto and to negotiate reinsurance. The company began business in 1990 and all outstanding shares are owned by Club Marketing and Sales Inc., a Florida insurance holding company.

    Major Rating Factors:

	   --  The current year operating ratio of 131.3% and the current
        capitalization level, which is completely dependent on surplus
        notes, are viewed as limiting factors.

	   --  Operating performance has been weak with a five-year average
        return on revenue of negative 6.9%. The principal cause is the
        restated 1998 after-tax net loss of $3.8 million from
        unrecorded expense liabilities from prior years. At the end of
        the third quarter of 2000, the company reported a very small
        net income in line with the prior year period. Full-year 1999
        net income was a reported loss of $500,000.

	   In 1999 SGI's reinsurance recoverables to surplus was 2.5 times
(x) and direct losses unpaid to surplus was more than 2x. The
company's dependence on reinsurance and high level of reinsurance
recoverables are viewed as limiting factors.

	   --  The company's business scope is considered limited. Surplus
        stood at $3.0 million at year-end 1999 and total 1999 net
        premiums written amounted to $3.7 million. As of September
        2000, the company's net writings declined only slightly to
        $3.5 million (or about 3%) from $3.6 million for the nine
        months ended Sept. 30, 1999, while policyholders' surplus
        increased marginally to $3.1 million from $3.0 million at
        year-end 1999.

    Ratings with a 'pi' subscript are insurer financial strength ratings based on an analysis of an insurer's published financial information and additional information in the public domain. They do not reflect in-depth meetings with an insurer's management and are therefore based on less comprehensive information than ratings without a 'pi' subscript. Ratings with a 'pi' subscript are reviewed annually based on a new year's financial statements, but may be reviewed on an interim basis if a major event that may affect the insurer's financial security occurs. Ratings with a 'pi' subscript are not subject to potential CreditWatch listings.
    Ratings with a 'pi' subscript generally are not modified with "plus" or "minus" designations. However, such designations may be assigned when the insurer's financial strength rating is constrained by sovereign risk or the credit quality of a parent company or affiliated group, Standard & Poor's said. -- CreditWire