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A.M. Best Places Ratings of Atlas Financial Holdings, Inc. and Its Subsidiaries Under Review With Negative Implications
[October 23, 2014]

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 has placed under review with negative implications the financial strength rating of B (Fair) and the issuer credit ratings (ICR) of "bb" of American Service Insurance Company, Inc., American Country Insurance Company (both domiciled in Elk Grove Village, IL) and Gateway (News - Alert) Insurance Company (St. Louis, MO), subsidiaries of Atlas Financial Holdings, Inc. (Atlas) (Cayman Islands) [NASDAQ: 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-" of Atlas.

The rating actions follow disclosure of a definitive agreement under which Atlas will acquire Global Liberty Insurance Company of New York (Global) (Melville, NY), along with its affiliated underwriting and premium finance companies for approximately $25 million. The transaction was funded largely with cash at Atlas, with financial leverage post-close expected to remain modest.

This transaction is expected to significantly accelerate Atlas' commercial automobile presence in select sub-segments of the large New York livery market and will add valuable infrastructure on the East Coast to support Atlas' continuing growth. A.M. Best anticipates that Global will not become a member of Atlas' existing reinsurance pooling agreement, and that Atlas will maintain Global's local inrastructure and have it serve as an East Coast regional office of Atlas.



The negative implications reflect the inherent risks associated with integrating Global into Atlas' ongoing operations and the uncertainties associated with Global's recent deterioration in its operating results and risk-adjusted capital. These concerns are somewhat elevated by the significant growth at American Service Pool as it continues to execute its strategy of recapturing former risks lost as a result of actions and decisions made by prior ownership. Growth at American Service Pool has also been driven more recently by firming market conditions in the pool's core light commercial automobile sector, namely taxi, limo and paratransit classes. Although the pool has reported improved underwriting and operating results over the past few years, growth in premium volume has strained the pool's risk-adjusted capital.

The ratings will remain under review pending the close of the transaction and discussions with management regarding the impact the transaction will have on Global and Atlas' current operating companies. The transaction is expected to close in the first quarter of 2015, subject to customary closing conditions, including regulatory approval of the change in control of Global.


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.

Key insurance criteria reports utilized:

  • Equity Credit for Hybrid Securities
  • Insurance Holding Company and Debt Ratings
  • Rating Members of Insurance Groups
  • Risk Management and the Rating Process for Insurance Companies
  • Understanding BCAR for Property/Casualty Insurers
  • Understanding Universal BCAR

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 © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.


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