OLDWICK: AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a” 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-” 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]). The outlook of these Credit Ratings (ratings) are stable. All companies are domiciled Atlanta GA, unless otherwise specified.
Concurrently, AM Best has affirmed the Long-Term ICR of “bbb-” of the parent company, Atlantic American Corporation (Atlantic American). The outlook of this rating is stable.
The ratings reflect American Southern Group’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM). The ratings also reflect the group’s long history of operating profitability, management’s disciplined underwriting approach and its local market knowledge. American Southern Group’s balance sheet strength assessment reflects risk-adjusted capitalization that is at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), partially offset by the group’s payment of substantial stockholder dividends, which historically have been used to service debt held at Atlantic American.
The ratings also consider the financial leverage and interest coverage at Atlantic American, with its adjusted debt-to-total capital at 15.4% as of Dec. 31, 2018. Interest coverage historically has been supported adequately by the insurance operating companies’ ability to generate sufficient earnings to cover obligations at the parent.
The ratings of BFLIG reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its marginal operating performance, neutral business profile and appropriate ERM.
The group has benefited from explicit capital support from its parent company, Atlantic American, in 2017 and 2018. The infusions have helped to bolster capital strength somewhat, as the results of new business development have added capital strain. Owing to the execution of the business development strategy in its Medicare supplement line of business, the group has incurred higher benefit losses and expenses, as well as the accompanying increases in reserves. The reported net losses over the past two years has increased the volatility of average earnings trend.
Business diversification, both geographic and by product design, has led to the execution of an extra-regional, business expansion strategy, which now covers new and traditional supplemental accident and health markets. The group is cautiously leveraging operations into a larger number of states, recasting its footprint. While BFLIG manages its ERM through traditional means, its governance, processes and procedures will need to continue to evolve as operations become more complex.[the_ad id=”31605″]