OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit rating (ICR) of “a” of American Southern Insurance Company (Topeka, KS) and its wholly owned and 100% reinsured subsidiary, American Safety Insurance Company (collectively referred to as American Southern Group). Concurrently, A.M. Best has affirmed the ICR of “bbb-” of the parent company, Atlantic American Corporation (Atlantic American) [NASDAQ: AAME].
A.M. Best has also affirmed the FSR of A- (Excellent) and the ICR of “a-” of Bankers Fidelity Life Insurance Company and its wholly owned and 100% reinsured subsidiary, Bankers Fidelity Assurance Company (formerly known as Direct Life Insurance Company) (collectively referred to as Bankers Fidelity Life Insurance Group). The outlook for all ratings is stable. All companies are domiciled in Atlanta, GA, unless otherwise specified.
American Southern Group’s ratings reflect its strong risk-adjusted capitalization, conservative balance sheet, long history of operating profitability, management’s disciplined underwriting approach and its local market knowledge. Somewhat offsetting these positive rating factors are the deterioration in American Southern Group’s underwriting performance in recent years, with moderate underwriting losses reported from 2010 to 2013, and the group’s history of paying substantial stockholder dividends, which historically have been used to service the debt held at Atlantic American.
The ratings of Bankers Fidelity Life Insurance Group reflect its sound level of risk-adjusted capitalization, a significant change in market focus and its strategic importance to the parent company, Atlantic American. Partially offsetting these strengths is an increasingly competitive business environment, delays due to the scope of business expansion plans and reduced capital strength at the main insurance operating company.
The ratings also consider the financial leverage and interest coverage at Atlantic American. Atlantic American’s adjusted debt-to-total capital as of June 30, 2015 was 16.6% and within A.M. Best’s guidelines for its current rating level. Interest coverage has historically been slightly below A.M. Best’s expectations for its current rating level; however, this is offset by the group’s ability to historically generate sufficient earnings to cover obligations at the parent. In addition, Atlantic American held roughly $21 million of cash and short-term investments and other marketable securities at June 30, 2015.
Negative rating actions could occur for American Southern Group if there is a significant deterioration in underwriting results over the near term, or if risk-adjusted capitalization were to significantly decline.
Negative rating actions could occur for Bankers Fidelity Life Insurance Company and Bankers Fidelity Assurance Company if there is a weakening of risk-adjusted capitalization, a persistent trend in operating losses, a declining revenue stream or if there is a loss of parental support.
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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