Despite the revised outlook, the ratings reflect the adequate consolidated capitalization of the ASI subsidiaries, their solid, overall operating results over the long term and the effective management of their insurance operations. The ratings also recognize ASI’s core underwriting expertise in its niche markets, with customized risk management programs and loss control services. While ASI’s overall risk-adjusted capitalization remains supportive of the current ratings (driven by its manageable underwriting leverage and modest investment leverage) further deterioration in operating profitability combined with the possibility of additional share repurchases could have a limiting, or even negative impact on the organization’s capital strength.ASI has taken advantage of its niche market expertise and has focused on generating operating earnings in support of business expansion and premium growth in recent years. However, the long-term profit or loss potential of the newer or expanded classes or lines of business have yet to be established. A.M. Best expects ASI to continue providing explicit support as needed in order to manage growth, which is part of its business plan as well as to ensure that the capitalization of ASRE and its related subsidiaries and affiliate are adequately reflected in the ratings. Positive rating actions could occur over the next 24 months, if there is notable sustained improvement in the underwriting results and operating profitability of ASI, especially as growth occurs in the assumed reinsurance portfolio and the newer segments of the excess and surplus lines portfolio. Key factors that could trigger negative rating actions include continuation of the recent deteriorating trend in ASI’s operating ratios, particularly if it results in the company’s balance sheet being materially impaired. Similarly, a failure to maintain adequate capitalization in the subsidiaries or at a consolidated level will be factors affecting the ratings adversely. The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; “Understanding Universal BCAR”; and “Rating Members of Insurance Groups.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology. Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com. Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.