AM Best Affirms Credit Ratings of Atlantic American Corporation and Its Subsidiaries
April 05 2019 - 12:01PM
Business Wire
AM Best has affirmed the Financial Strength Rating (FSR)
of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term
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). Additionally, AM Best has affirmed the FSR of A-
(Excellent) and the Long-Term ICRs of “a-” of Bankers Fidelity Life
Insurance Company and its wholly owned and 100% reinsured
subsidiary, Bankers Fidelity Assurance Company (collectively
referred to as Bankers Fidelity Life Insurance Group [BFLIG]). The
outlook of these Credit Ratings (ratings) are stable. All companies
are domiciled Atlanta GA, unless otherwise specified.
Concurrently, AM Best has affirmed the Long-Term ICR of “bbb-”
of the parent company, Atlantic American Corporation (Atlantic
American) [NASDAQ: AAME]. The outlook of this rating is stable.
The ratings reflect American Southern Group’s balance sheet
strength, which AM Best categorizes as very strong, as well as its
adequate operating performance, neutral business profile and
appropriate enterprise risk management (ERM). The ratings also
reflect the group’s long history of operating profitability,
management’s disciplined underwriting approach and its local market
knowledge. American Southern Group’s balance sheet strength
assessment reflects risk-adjusted capitalization that is at the
strongest level, as measured by Best’s Capital Adequacy Ratio
(BCAR), partially offset by the group’s payment of substantial
stockholder dividends, which historically have been used to service
debt held at Atlantic American.
The ratings also consider the financial leverage and interest
coverage at Atlantic American, with its adjusted debt-to-total
capital at 15.4% as of Dec. 31, 2018. Interest coverage
historically has been supported adequately by the insurance
operating companies’ ability to generate sufficient earnings to
cover obligations at the parent.
The ratings of BFLIG reflect its balance sheet strength, which
AM Best categorizes as very strong, as well as its marginal
operating performance, neutral business profile and appropriate
ERM.
The group has benefited from explicit capital support from its
parent company, Atlantic American, in 2017 and 2018. The infusions
have helped to bolster capital strength somewhat, as the results of
new business development have added capital strain. Owing to the
execution of the business development strategy in its Medicare
supplement line of business, the group has incurred higher benefit
losses and expenses, as well as the accompanying increases in
reserves. The reported net losses over the past two years has
increased the volatility of average earnings trend.
Business diversification, both geographic and by product design,
has led to the execution of an extra-regional, business expansion
strategy, which now covers new and traditional supplemental
accident and health markets. The group is cautiously leveraging
operations into a larger number of states, recasting its footprint.
While BFLIG manages its ERM through traditional means, its
governance, processes and procedures will need to continue to
evolve as operations become more complex.
This press release relates to Credit Ratings that have been
published on AM 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 AM 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 AM
Best press releases, please view Guide for Media - Proper
Use of Best’s Credit Ratings and AM Best Rating Action Press
Releases.
AM Best is a global rating agency and information provider
with a unique focus on the insurance industry. Visit
www.ambest.com for more information.
Copyright © 2019 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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version on businesswire.com: https://www.businesswire.com/news/home/20190405005340/en/
Robert ValentaSenior Financial Analyst—P/C+1
908 439 2200, ext. 5291robert.valenta@ambest.comDavid
MitchellSenior Financial Analyst—L/H+1 908 439 2200,
ext. 5556david.mitchell@ambest.comChristopher
SharkeyManager, Public Relations+1 908 439 2200, ext.
5159christopher.sharkey@ambest.comJim PeavyDirector,
Public Relations+1 908 439 2200, ext.
5644james.peavy@ambest.com
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