|[November 14, 2012]
A.M. Best Places Ratings of Atlas Financial Holdings, Inc. and Its Subsidiaries Under Review With Negative Implications
OLDWICK, N.J. --(Business Wire)--
A.M. Best Co. has placed under review with negative implications
the financial strength rating of B (Fair) and issuer credit ratings
(ICR) of "bb" of American Service Insurance Company Inc. and American
Country Insurance Company (both domiciled in Elk Grove Village, IL),
subsidiaries of Atlas Financial Holdings, Inc. (Atlas) (Cayman
Islands) [TSXV: AFH]. These companies operate under an intercompany
reinsurance pooling agreement and are collectively referred to as
American Service Pool. A.M. Best also has placed under review with
negative implications the ICR of "b-" and the debt rating of "ccc" on
$18 million 4.5% preferred shares of Atlas.
The rating actions follow disclosure of a definitive agreement under
which Atlas will acquire all of the issued and outstanding shares of
Camelot Services, Inc. (Missouri) and its wholly owned subsidiary, Gateway (News - Alert)
Insurance Company (Gateway) (St. Louis, MO). The negative
implications reflect the inherent risk associated with integrating
Gateway's ongoing business into American Service Pool's existing
infrastrcture, while overseeing the run off of Gateway's non-core
lines, and the increase in financial leverage at Atlas as a result of
funding the transaction, in part, with the issuance of preferred stock.
These risks are somewhat mitigated by Atlas' recent experience running
off similar books of business as well as Gateway's current owner fully
reinsuring all of Gateway's workers' compensation related risk and
providing additional adverse development protection as set out in the
definitive purchase agreement.
The ratings will remain under review until the close of the transaction
and the completion of A.M. Best's analysis of its impact on the group's
ratings. The transaction is expected to close in the first quarter of
2013, pending regulatory approval.
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. Key criteria utilized include: "Risk
Management and the Rating Process for Insurance Companies"; "Insurance
Holding Company and Debt Ratings"; "Equity Credit for Hybrid
Securities"; "Understanding BCAR for Property/Casualty Insurers"; and
"Rating Members of Insurance Groups." Best's Credit Rating Methodology
can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS
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