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]). 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 these Credit Ratings (ratings) are stable. All companies are domiciled in Atlanta GA, unless otherwise specified.
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 15.5% as of Dec. 31, 2019. Interest coverage historically has been supported adequately by the insurance operating companies’ ability to generate sufficient earnings to cover debt service 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 Atlantic American over the last several years. Infusions have helped to maintain capital strength as new business development has strained capital, and AM Best expects that the parent organization will continue to support BFLIG. Over the past four years, the group has incurred increasingly higher underwriting losses and expenses, in addition to related required reserve increases, due to its Medicare supplement business development and growth strategy. In response, the group has implemented several initiatives to restore the profitability of its Medicare supplement segment, including rate increases, adjustments to distribution and related compensation and underwriting practice changes.
Additionally, BFLIG is now strategically expanding its supplemental worksite business to additional states and marketing new, redesigned individual supplemental accident and health products to diversify its business mix.
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 Guide to 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.
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Senior Financial Analyst—P/C
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