A.M. Best Comments on Credit Ratings of AmTrust Financial Services, Inc. Following Announcement of Reinsurance Agreement
July 06 2017 - 5:06PM
Business Wire
A.M. Best has commented that the Long-Term Issuer Credit
Rating (Long-Term ICR) of “bbb“ of AmTrust Financial Services,
Inc. (AFSI) [NASDAQ:AFSI] (headquartered in New York, NY) and
all Long-Term Issue Credit Ratings assigned to AFSI-issued
securities are unchanged by today’s announcement that the company
has entered into a reinsurance agreement with Premia Holdings, Ltd.
(Premia), which will cover loss reserve development up to $400
million over AFSI’s stated reserves as of March 31, 2017.
Similarly, the Financial Strength Rating (FSR) of A (Excellent) and
the Long-Term ICR of “a” of the members of the AmTrust
Group, and the FSR of A- (Excellent) and the Long-Term ICR of
“a-” of AmTrust Title Insurance Company also are unchanged
by the announcement. The outlook of these Credit Ratings (ratings)
remains negative.
Under the terms of the reinsurance agreement, Premia will
provide up to $1.025 billion in coverage for adverse development of
reserves, attaching when losses exceed $5.96 billion of net loss
reserves. This provides approximately $400 million of coverage
above AFSI’s carried reserve position of $6.59 billion as of March
31, 2017. The premium that will be paid for the coverage is
approximately $50 million. AFSI also will pay administrative fees
of $1 million annually, which will be accrued as an expense
liability at a present value of $11 million. AFSI will recognize an
after-tax charge to net income of approximately $39 million in the
second quarter of 2017 as a result of this transaction. A.M. Best
anticipates that this will be more than offset by the gain AFSI
will recognize from the sale of its common equity holdings of
National General Holdings Corp. during the second
quarter.
The implementation of the reinsurance agreement will increase
the future stability of AFSI’s balance sheet, which A.M. Best views
as credit positive. However, the agreement does not significantly
strengthen A.M. Best’s view of AFSI’s risk-adjusted capital
position as calculated by Best’s Capital Adequacy Ratio (BCAR),
given the assumed deficiency incorporated in the BCAR. The future
development of AFSI’s reserves, including reserves that may be
transferred under this agreement, may drive future positive or
negative rating action.
This press release relates to Credit Ratings 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 see A.M.
Best’s Recent Rating Activity web page. For
additional information regarding the use and limitations of Credit
Rating opinions, please view Understanding Best’s Credit
Ratings. For information on the proper media use of Best’s
Credit Ratings and A.M. Best press releases, please view
Guide for Media - Proper Use of Best’s Credit Ratings and A.M.
Best Rating Action Press Releases.
A.M. Best is the world’s oldest and most authoritative
insurance rating and information source. For more information,
visit www.ambest.com.
Copyright © 2017 by A.M. Best Rating
Services, Inc. and/or its subsidiaries. ALL RIGHTS
RESERVED.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170706006206/en/
A.M. BestJennifer Marshall, +1-908-439-2200, ext.
5327Directorjennifer.marshall@ambest.comorMichael J.
Lagomarsino, CFA, FRM, +1-908-439-2200, ext. 5810Senior
Directormichael.lagomarsino@ambest.comorChristopher Sharkey,
+1-908-439-2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorJim Peavy,
+1-908-439-2200, ext. 5644Director, Public
Relationsjames.peavy@ambest.com
Amtrust Financial Services, Inc. (delisted) (NASDAQ:AFSI)
Historical Stock Chart
From Mar 2024 to Apr 2024
Amtrust Financial Services, Inc. (delisted) (NASDAQ:AFSI)
Historical Stock Chart
From Apr 2023 to Apr 2024