OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of B++ (Good) and issuer credit rating of “bbb” of American Federated Insurance Company (AFIC) (Flowood, MS). The outlook for both ratings is stable.
AFIC is a wholly owned subsidiary of First Tower LLC (First Tower), a multiline specialty finance company. In June 2012, Prospect Capital Corporation [NASDAQ: PSEC], a publicly-traded closed-end investment company, acquired an 80.1% majority interest in First Tower Corp, AFIC's former parent and its subsidiaries.
The ratings reflect AFIC’s solid risk-adjusted capitalization and historically consistent and profitable underwriting and operating performance, which compare favorably with its peers. These positive rating factors are derived from the company’s extensive experience and specialized niche writing collateral protection insurance on personal loans originated by the consumer finance subsidiaries of First Tower.
Partially offsetting these positive rating factors are AFIC’s product and geographic concentration, which expose it to judicial, regulatory and legislative risks and weather-related events. The company expanded into Alabama and Illinois in 2013, providing further diversification to these risks. Despite the still generally weak economy, the outlook reflects A.M. Best’s expectations that favorable earnings will continue to support operations while maintaining an adequate level of risk-adjusted capitalization over the near to intermediate term.
A.M. Best believes AFIC is well positioned at its current rating level. However, the company’s ratings/outlook could come under pressure should its underwriting and overall profitability measures underperform its peers, there be a material decline in its risk-adjusted capitalization and/or Prospect Capital Corporation fails to provide adequate support for First Tower and its subsidiaries.
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. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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