Best Affirms American Service Pool Ratings; Outlook Stable

January 31, 2012

A.M. Best Co. has affirmed the financial strength rating of ‘B’ (Fair) and issuer credit ratings (ICR) of “bb” of Illinois-based American Country Insurance Company and American Service Insurance Company, Inc. – members of the American Service Pool (ASI Pool).

Best also affirmed the ICR of “b-” of Cayman Islands-based Atlas Financial Holdings, Inc., the ASI Pool members’ parent, and the debt rating of “ccc” of Atlas’ $18 million, 4.5 percent preferred shares. The outlook for all of the ratings is stable.

The rating affirmations reflect ASI Pool’s “historically weak operating performance, unfavorable reserve development and diminished business profile, all of which occurred under prior ownership,” Best explained.

Best added that the ratings also “recognize a level of execution risk associated with management refocusing on its core lines of business while attempting to meet business plans and grow its premiums during a time of competitive market conditions, as well as the uncertainty surrounding the runoff of unprofitable business written while the pool was under the control of prior ownership.”

As more positive factors, Best cited “Atlas’ knowledgeable management team that has extensive experience in its targeted commercial auto lines of business, its improving risk-adjusted capitalization, which is supportive of the current ratings, renewed focus on core lines of business and the potential for improved earnings as management focuses on historically profitable lines of business and runs off non-core lines and books produced by general and managing general agents.”

However, Best also indicated that although the outlook is stable, “factors that may lead to negative rating actions include deterioration in underwriting and operating performance, increased magnitude of adverse loss reserve development and the erosion of surplus that could consequently cause a decline in the pool’s risk-adjusted capital position.

“Factors that may lead to positive rating actions include stabilization of the pool’s loss reserve position, improved operating profitability and enhanced risk-adjusted capitalization.”

Source: A.M. Best

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