Standard and Poor’s Lowers Sterling Casualty Ratings to ‘BBpi’

Standard & Poor’s has lowered its counter party credit and financial strength ratings on California-based Sterling Casualty Insurance Co. to double-’Bpi’ from triple-’Bpi’ because of the company’s concentration in equities, the California auto market, decline in liquidity, and volatile earnings.

“At year-end 2001, Sterling’s capitalization continued to be strong,” Standard & Poor’s credit analyst Alan Koerber remarked. However, the company’s common stock investments constitute 167.4 percent of surplus, which—in the context of erratic earnings—is viewed as limiting factor.

Sterling’s geographic and product line concentrations are high. At year-end 2001, 100 percent of the company’s business was in California private passenger auto insurance. Liquidity has declined over the last two years. Operating performance over the past five years has been acceptable but volatile.

Sterling writes mainly private passenger auto insurance with a specialization in the non-standard automobile market. Its products are distributed through independent general agents and brokers, including the company’s captive broker affiliate, Dashers Insurance Services. Sterling, which began business in 1982, is wholly-owned by H& H Agency Inc., a managing general agency. The company also has a claim services agreements with its affiliate, D&H Claim Service.

The company, which is unaffiliated with any other insurance company, is rated on a stand-alone basis.