|Christine DePalma, ARM, AINS, AIS |
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FOR IMMEDIATE RELEASE
OLDWICK - MARCH 01, 2022 01:20 PM (EST)
AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a” (Excellent) 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-” (Excellent) 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-” (Good) of the parent company, Atlantic American Corporation (Atlantic American) [NASDAQ: AAME]. The outlook of these Credit Ratings (ratings) is stable. All companies are domiciled Atlanta, GA, unless otherwise specified.
The ratings reflect American Southern Group’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The ratings of American Southern Group reflect its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), historically profitable operating results, management’s disciplined underwriting approach and its local market expertise. Partially offsetting these positive rating factors are the group’s payment of substantial annual stockholder dividend payments, which Atlantic American uses to service its debt.
The ratings also consider the financial leverage and interest coverage at Atlantic American, with its adjusted debt-to-capital at 14.2% as of Dec. 31, 2021. Interest coverage historically receives sufficient support from the insurance operating companies to cover debt service obligations at the parent, given the companies’ ability to generate sufficient earnings.
The ratings of BFLIG reflect its balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, neutral business profile and appropriate ERM.
The group has benefited over the past several years from explicit capital support provided by its parent company, Atlantic American. Capital infusions have helped to maintain capital strength and offset strain of new business growth, and AM Best expects that the parent organization will continue to support the BFLIG entities as needed. BFLIG reported a modest operating loss in 2021, after returning to operating profitability in 2020. The operating loss was driven largely by a combination of factors including a decrease in net premium, higher net benefits in the individual life business and higher-than-expected Medicare supplement morbidity from pent-up demand following lower utilization in 2020. In addition, new administration system costs and lower-than-expected reinsurance expense allowances also impacted results. The operating gain reported in 2020 resulted from implemented initiatives to improve the underwriting performance of its Medicare supplement business including adjustments to distribution and related compensation, underwriting practice changes, and rate increases. While the business profile remains neutral, AM Best notes that BFLIG is now marketing new, redesigned supplemental accident and health and life products to diversify its business mix while continuing to expand its supplemental worksite business strategically to more states, and has experienced good new business growth leading into 2022.
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 use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.