A.M. Best has affirmed the financial strength rating of B++
(Good) and issuer credit rating of “bbb” of American Federated
Insurance Company (AFIC) (Flowood, MS). The outlook for both ratings
is stable.
AFIC is a wholly owned subsidiary of First Tower LLC (First Tower), a
multiline specialty finance company. In June 2012, Prospect Capital
Corporation [NASDAQ: PSEC], a publicly-traded closed-end investment
company, acquired an 80.1% majority interest in First Tower Corp, AFIC's
former parent and its subsidiaries.
The ratings reflect AFIC’s solid risk-adjusted capitalization and
historically consistent and profitable underwriting and operating
performance, which compare favorably with its peers. These positive
rating factors are derived from the company’s extensive experience and
specialized niche writing collateral protection insurance on personal
loans originated by the consumer finance subsidiaries of First Tower.
Partially offsetting these positive rating factors are AFIC’s product
and geographic concentration, which expose it to judicial, regulatory
and legislative risks and weather-related events. The company expanded
into Alabama and Illinois in 2013, providing further diversification to
these risks. Despite the still generally weak economy, the outlook
reflects A.M. Best’s expectations that favorable earnings will continue
to support operations while maintaining an adequate level of
risk-adjusted capitalization over the near to intermediate term.
A.M. Best believes AFIC is well positioned at its current rating level.
However, the company’s ratings/outlook could come under pressure should
its underwriting and overall profitability measures underperform its
peers, there be a material decline in its risk-adjusted capitalization
and/or Prospect Capital Corporation fails to provide adequate support
for First Tower and its subsidiaries.
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. Best’s Credit Rating Methodology can be
found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world's oldest and most authoritative
insurance rating and information source. For more information, visit www.ambest.com.
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