Press Release - MAY 29, 2015

A.M. Best Affirms Ratings of AmTrust Financial Services, Inc. and Its Subsidiaries


CONTACTS:
 Brian O’Larte
Senior Financial Analyst
(908) 439-2200, ext. 5138
brian.o’larte@ambest.com

Michael Lagomarsino, CFA
Assistant Vice President
(908) 439-2200, ext. 5810
michael.lagomarsoino@ambest.com
Christopher Sharkey
Manager, Public Relations
(908) 439-2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

OLDWICK - MAY 29, 2015
A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of "a" of the property/casualty subsidiaries of AmTrust Financial Services, Inc. (AFSI) (New York, NY) [NASDAQ: AFSI], also known as AmTrust Group (AmTrust). Concurrently, A.M. Best has affirmed the ICR of "bbb" and the debt ratings of AFSI. The outlook for all ratings is stable. (See below for a detailed list of the companies and ratings.) In addition, A.M. Best has withdrawn the ratings of AmTrust Lloyd's Insurance Company of Texas given the company's inactive status and limited business profile.

The rating actions reflect AmTrust's solid balance sheet strength, strong underwriting and operating performance within its niche market segments, as well as the implicit and explicit support from its parent, AFSI, if needed for AmTrust's expanding operations. AmTrust has been successful in executing a business plan that is focused on growth through the acquisition of companies, renewal rights offerings and established books of business at appropriate rates, terms and conditions, such as the Tower Cut-Through Reinsurance Agreement transaction. This enables AmTrust to further benefit from its expandable underwriting platform to drive expense savings.

Partially offsetting these positive rating factors are AmTrust's continued significant growth in premium volume and associated liabilities over the current five-year period, primarily achieved through rate increases and acquisitions that are either renewal rights transactions or outright purchases of companies. These acquisitions have the inherent risk associated with expansion into new markets and integrating new business, such as the aforementioned Tower transaction. Although the organization has historically executed these types of transactions in the past, and the group appears to be applying discipline in its underwriting and controls, there remains a considerable risk associated with the amount of growth over the past five years. Concerns around growth within its workers' compensation line of business are somewhat mitigated by the group's focus on target niche classes, which have historically been lower hazard, and small accounts in which claims trends within its niches have historically been of shorter duration with a good percentage of its claims being classified as medical only or temporary injury.

AFSI's adjusted debt-to-total capital, excluding accumulated other comprehensive income (AOCI) of 17.4% and adjusted debt-to-tangible capital (excluding AOCI) of 22.4% as of March 31, 2015, (nearly 30% of the group's equity consists of goodwill and intangible assets) was within A.M. Best's expectations at its current rating level. In addition, the company's access to a $350 million credit facility and non-operating company dividend capacity provide ample liquidity to meet any corporate obligations. AFSI maintains a strong interest coverage ratio that is well within A.M. Best's guidelines for its ratings.

Key rating factors that may lead to positive rating actions include the organization outperforming its peers for an extended period while maintaining a sound balance sheet and solid risk-adjusted capitalization. However, negative rating actions could occur if the group's operating performance falls markedly short of A.M. Best's expectations, there is deterioration in its loss reserve position or risk-adjusted capitalization significantly declines.

The FSR of A (Excellent) and the ICRs of "a" have been affirmed for the following property/casualty subsidiaries of AmTrust Financial Services, Inc.:


  • AmTrust International Insurance, Ltd.

  • Technology Insurance Company, Inc.

  • Rochdale Insurance Company

  • Wesco Insurance Company

  • Milwaukee Casualty Insurance Company

  • Security National Insurance Company

  • AmTrust Insurance Company of Kansas

  • AmTrust International Underwriters Limited

  • AmTrust Europe Limited

  • Associated Industries Insurance Company, Inc.

  • AmTrust Insurance Luxembourg S.A.

  • CorePointe Insurance Company

  • Comp Options Insurance Company

  • Sequoia Insurance Company

  • Sequoia Indemnity Company

  • Indemnity Company of California

  • Developers Surety and Indemnity Company

  • First Nonprofit Insurance Company

The following debt ratings have been affirmed:

AmTrust Financial Services, Inc.

— "bbb" on $250 million 6.125% senior unsecured notes, due 2023

— "bbb" on $158 million 2.75% convertible senior unsecured notes, due 2044

— "bbb" on $76 million 2.75% convertible senior unsecured notes, due 2044

— "bbb" on $69 million 5.5% convertible senior unsecured notes, due 2021

— "bb+" on $120 million 6.75% preferred stock

— "bb+" on $100 million 7.25% preferred stock

— "bb+" on $182.5 million 7.5% preferred stock

— "bb+" on $80 million 7.625% preferred stock

The following indicative ratings on securities available under the shelf registration have been affirmed:

AmTrust Financial Services, Inc.

— "bbb" on senior unsecured debt

— "bbb-" on subordinated debt

— "bb+" on preferred stock

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. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology .

Key insurance criteria reports utilized:


  • Analyzing Insurance Holding Company Liquidity

  • Catastrophe Analysis in A.M. Best Ratings

  • Equity Credit for Hybrid Securities

  • Insurance Holding Company and Debt Ratings

  • Rating Members of Insurance Groups

  • Risk Management and the Rating Process for Insurance Companies

  • The Treatment of Terrorism Risk in the Rating Evaluation

  • Understanding BCAR for Property/Casualty Insurers

  • Understanding Universal BCAR

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.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.


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