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Best’s News & Research Service - June 09, 2015 03:06 PM (EDT)

A.M. Best Affirms Ratings of Atlantic Coast Life Insurance Company

  • June 09, 2015 03:06 PM (EDT)
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Oldwick //BestWire// - A.M. Best has affirmed the financial strength rating of B+ (Good) and the issuer credit rating of "bbb-"of Atlantic Coast Life Insurance Company (ACL) (Charleston, SC). The outlook for both ratings is stable.

The affirmation of the ratings acknowledges the acquisition of ACL on June 5, 2015 by Advantage South LLC, a privately held intermediate insurance holding company whose majority shareholder is Advantage Capital Holdings LLC (ACH), a privately owned company. ACL's former owners and co-founders will continue to have some management responsibilities.

ACL's risk-adjusted capitalization has improved, benefiting in part from one-time reserve releases and the proceeds of a surplus note issued to an affiliated insurance entity, Ability Insurance Company (AIC), which is wholly owned by ACH. The ratings recognize the potential to further expand ACL's business profile beyond the pre-need marketplace to include annuities and supplemental health marketed to the senior marketplace using ACL's existing distribution systems.

Partially offsetting factors include the ACL's current modest business and operating profile, coupled with execution risk related to the implementation of ACH's business strategy. Additionally, A.M. Best expects that the majority of ACL's traditional fixed income investment portfolio will be liquidated and replaced with shorter duration, asset-backed securities that are less liquid but offer floating rate protection. These asset classes could result in increased credit risk if the issuers are unable to support their debt in a rising interest rate environment. A.M. Best will continue to monitor the portfolio's investment performance over time. Following the change in ownership, there is some counterparty credit risk within the organization given AIC is an unrated insurer whose primary business line is long-term care, which is not viewed as a highly credit worthy business on A.M. Best's product continuum. However, A.M. Best acknowledges certain changes ACH has made to reduce the risk profile of AIC.

Positive rating movement could occur based on successful execution of the new strategic plan, which would result in the expansion of ACL's business profile and favorable operating metrics, coupled with the maintenance of strong risk-adjusted capitalization ratios. A negative rating action could result if distribution relationships become severed, ACH fails to execute its strategic plan, there is a material increase in investment risk at a rate not commensurate with the maintenance of strong risk-adjusted capitalization ratios or ACL experiences material levels of asset impairments or elevated asset risk resulting in a significant decline in 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. Best's Credit Rating Methodology can be found at .

Key insurance criteria reports utilized:

  • Evaluating U.S. Surplus Notes

  • Rating Members of Insurance Groups

  • Risk Management and the Rating Process for Insurance Companies

  • Understanding BCAR for U.S. and Canadian Life/Health Insurers

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.

South Carolina United States Financial Strength Life Insurers Press Release Insurance Issuer Credit Rating Best's Credit Rating Action

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