A.M. Best Removes From Under Review Ratings of Atlas Financial Holdings, Inc. and Its Subsidiaries
OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has removed from under review with negative implications and affirmed the financial strength rating (FSR) of B (Fair) and issuer credit ratings (ICR) of "bb" of American Service Insurance Company Inc. and American Country Insurance Company (both domiciled in Elk Grove Village, IL). In addition, A.M. Best has removed from under review with developing implications and affirmed the FSR of B (Fair) and ICR of "bb" of the newly acquired Gateway Insurance Company (Gateway) (St. Louis, MO). All three companies are subsidiaries of Atlas Financial Holdings, Inc. (Atlas) (Cayman Islands) (TSXV: AFH). These companies operate under an intercompany reinsurance pooling agreement and are collectively referred to as American Service Pool (ASI Pool). Concurrently, A.M. Best has removed from under review with negative implications and affirmed the ICR of "b-" and the debt rating of "ccc" of $18 million 4.5% preferred shares of Atlas. At the same time, A.M. Best has withdrawn the debt rating. The outlook assigned to all the remaining ratings is stable.
The rating actions follow the regulatory approval of a definitive agreement under which Atlas acquired all of the issued and outstanding shares of Camelot Services, Inc. and its wholly owned subsidiary, Gateway. In addition, effective January 1, 2013, ASI Pool's intercompany reinsurance pooling agreement was revised to add Gateway as a participating company.
The rating affirmations reflect a level of execution risk associated with ASI Pool management's refocusing on its core lines of business while attempting to meet business plans and grow its premiums during a time of competitive market conditions, as well as during the run off of unprofitable business written while the pool was under the control of prior ownership. In addition, there is inherent risk associated with integrating Gateway's taxi business into the existing pool's infrastructure as well as handling Gateway's commercial truck run off.
These negative rating factors are partially offset by ASI Pool's improving risk-adjusted capitalization, which is supportive of its current ratings, its management team with extensive experience in its targeted commercial auto lines of business and the potential for improved earnings, as was the case in 2012, as management focuses on historically profitable lines of business and runs off non-core lines and books produced by general and managing general agents.
While A.M. Best believes the ASI Pool is well positioned at its current rating level, factors that may lead to negative rating actions include further deterioration in its underwriting and operating performance, increased magnitude of adverse loss reserve development and the erosion of surplus that could cause a decline in the pool's risk-adjusted capital position. Factors that may lead to positive rating actions include stabilization of the pool's loss reserve position, improved operating profitability and enhanced risk-adjusted capitalization.
The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: "Risk Management and the Rating Process for Insurance Companies"; "Insurance Holding Company and Debt Ratings"; "Understanding Universal BCAR"; "Equity Credit for Hybrid Securities"; "Understanding BCAR for Property/Casualty Insurers"; and "Rating Members of Insurance Groups." Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
A.M. Best Co.
Michael Russo, 908-439-2200, ext. 5372
Senior Financial Analyst
Michael Lagomarsino, CFA, 908-439-2200, ext. 5810
Assistant Vice President
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
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