AM Best Information Services

MAY 10, 2016 12:22 PM (EDT)

A.M. Best Upgrades Ratings of Fortegra Financial Corporation’s Insurance Subsidiaries

 Kimberly Muccia
Financial Analyst—P/C
+1 908 439 2200, ext. 5731

Peter Kelly
Senior Financial Analyst—L/H
+1 908 439 2200, ext. 5834

Christopher Sharkey
Manager, Public Relations
+1 908 439-2200, ext. 5159

Jim Peavy
Assistant Vice President, Public Relations
+1 908 439-2200, ext. 5644


OLDWICK - MAY 10, 2016 12:22 PM (EDT)
A.M. Best has upgraded the financial strength rating (FSR) to A- (Excellent) from B++ (Good) and the issuer credit ratings (ICR) to “a-” from “bbb+” of the rated operating subsidiaries of Fortegra Financial Corporation (Fortegra) (headquartered in Jacksonville, FL). Fortegra is a wholly owned subsidiary of Tiptree Financial Inc. (Tiptree) [NASDAQ: TIPT]. The property/casualty operating subsidiaries of Fortegra include Lyndon Southern Insurance Company (Lyndon Southern) (Wilmington, DE), Insurance Company of the South (ICOTS) (Athens, GA) and Response Indemnity of California (RIC) (Rondo Beach, CA), which operate under an intercompany pooling agreement and are collectively referred to as Fortegra P&C Group. Additionally, A.M. Best has assigned the FSR of A- (Excellent) and an ICR of “a-” to RIC. The outlook assigned to each rating is stable.

The life/health operating subsidiaries include Life of the South Insurance Company (Nashville, GA); Bankers Life of Louisiana (Ruston, LA); and Southern Financial Life Insurance Company (Scottsville, KY); which are collectively referred to as the Life of the South Group.

The ICR for each of the operating subsidiaries (except for RIC) has been revised to stable from negative, while the FSR outlook remains stable.

The rating actions for Fortegra’s insurance subsidiaries reflect the significant improvement in the group’s financial leverage measures as a result of a significant capital infusion that Tiptree made in April 2016, which reduces Fortegra’s financial leverage measures to moderate levels. The ratings of Fortegra P&C Group also recognize the companies’ solid risk-adjusted capitalization, niche distribution and the historical profitable operating performance of their core credit–related books of business. Somewhat offsetting these favorable rating factors are the limited scope of the companies’ operations, considerable growth in direct writings in recent years and heavy reliance on third-party reinsurance, as evidenced by the companies’ elevated gross and ceded underwriting leverage measures. However, the associated credit risk related to the companies’ reliance on third-party reinsurance recoverables is mitigated by the credit quality of its rated reinsurers and collateralization of recoverables due from non-rated entities.

The ratings for the Life of the South Group acknowledge its sufficient consolidated risk-adjusted capitalization and conservative investment portfolios. The ratings also recognize the group’s positive net operating performance, derived primarily from its core credit life and credit accident and health businesses, as well as the positive trends in premium growth. Somewhat offsetting these factors are Life of the South Group’s limited business profile, although the group continues to expand its product offerings and distribution capabilities. A.M. Best believes the group may be challenged to sustain and improve its net operating performance given the challenges of the persistent low interest rate environment and the expense strains expected from anticipated new business growth.

Rating factors that could result in negative rating actions include a significant and sustained decline in risk-adjusted capitalization; a decline in the current levels of underwriting or operating performance; or a deterioration in the quality of Fortegra’s consolidated balance sheet, including, but not limited to, an increase in financial leverage or an increase in the ratio of intangible assets to stockholders’ equity.

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 see A.M. Best’s Recent Rating Activity web page.

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

Related Companies

For information about each company, including the Best's Credit Reports, group members (where applicable) and news stories, click on the company name. An additional purchase may be required.