OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has removed the ratings from under review with negative implications and affirmed the financial strength rating of B (Fair) and the issuer credit ratings (ICR) of “bb” of American Service Insurance Company Inc., American Country Insurance Company (both domiciled in Elk Grove Village, IL) and Gateway Insurance Company (St. Louis, MO). These companies are subsidiaries of Atlas Financial Holdings, Inc. (Atlas) (Cayman Islands) [NASDAQ:AFH] and operate under an intercompany reinsurance pooling agreement, collectively referred to as American Service Pool (ASI Pool). Concurrently, A.M. Best has removed the ratings from under review with negative implications and affirmed the ICR of “b-” of Atlas. The outlook assigned to all ratings is stable.
The ratings of Atlas and the ASI Pool members were placed under review with negative implications following Atlas’ announcement that it was acquiring Global Liberty Insurance Company of New York, (Global) (Melville, NY), along with its affiliated underwriting and premium finance companies. The removal of the ratings from under review follows the close of the transaction as well as the completion of discussions with management and the resolution of prior concerns with the pool’s marginal risk-adjusted capitalization. The ratings of Global will remain under review pending further discussion with management regarding its current and prospective business plans.
The ratings affirmation of the ASI Pool reflect its volatile, and at times, weak risk-adjusted capital position, as a result of the achievement of significant premium growth over the past several years and the execution risk associated with its growth as management has refocused on its core lines of business in connection with Atlas’ strategic business plans.
These negative rating factors are partially offset by ASI Pool’s extensive experience in the commercial auto lines of business and improved operating results beginning in 2012, which demonstrate progress in connection with Atlas’ strategic focus, as management focuses on historically profitable lines of business and run-off of its non-core lines and books produced by general and managing general agents. Additionally, the capital position of the pool was significantly improved during the second quarter of 2015 as a result of the issuance of three surplus notes from the pool’s operating companies to Atlas totaling $15.5 million. As a result, the pool’s risk-adjusted capitalization currently supports its ratings alleviating some of the concerns associated with its significant premium growth.
Atlas’ adjusted financial leverage ratio increased to 17.9% at second-quarter 2015 from 1.8 % at year-end 2014, as a result of the additional borrowing of funds from its credit facility in order to fund the aforementioned surplus notes issued by members of the ASI Pool. Despite the increase in financial leverage, A.M. Best notes that the company’s financial leverage and interest coverage remain within A.M. Best’s guidelines for its current rating.
This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best’s Ratings & Criteria Center.
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