Best Upgrades Am. Country, Am. Service after Kingsway Public Offering

A.M. Best Co. has upgraded the financial strength rating (FSR) to ‘B’ (Fair) from ‘B-‘ (Fair) and issuer credit ratings (ICR) to “bb” from “bb-” of American Country Insurance Company and American Service Insurance Company, Inc., both domiciled in Elk Grove Village, Ill. Both companies are members of the American Service Pool (ASI Pool).

In addition Best has removed all of the ratings from under review with developing implications, and has assigned an ICR of “b-” to Cayman Islands-based Atlas Financial Holdings, Inc. and a debt rating of “ccc” to Atlas’ $18 million, 4.5 percent preferred shares. The outlook assigned to all ratings is stable.

Best took the rating actions following the successful completion of the going public transaction by Ontario-based Kingsway Financial Services, Inc. “to create new ownership for American Country and American Service, which operate under an intercompany pooling agreement. This was accomplished by creating Atlas and transferring ownership from Kingsway to Atlas through a reverse merger transaction. Atlas is a public company whose common shares are listed on the TSX Venture Exchange under the symbol AFH.”

Best explained that the “ratings are reflective of the ASI Pool’s unprofitable operating performance and above average underwriting leverage, which are offset in part by minimally supportive yet improving capitalization and business profile. In addition, capitalization and earnings are expected to improve due to the run-off of claims on cancelled business and actions taken by management to strengthen the balance sheet, cancel unprofitable and non-core lines of business, reduce expenses and focus underwriting on its historically profitable commercial auto business.”

However, Best warned that “management will be challenged to meet growth and earnings projections by strong competitive pricing pressure, weak economic conditions, below average interest rates and historically unfavorable loss reserve development. These concerns are partially mitigated by Atlas’ knowledgeable management team and improvement in claims management and reserving.”

Source: A.M. Best