AM Best Revises Outlooks to Stable for American Federated Insurance Company, Affirms Credit Ratings of American Federated Life Insurance Company
OLDWICK, NJ, August 25, 2022–(BUSINESS WIRE)–AM Best has revised the outlooks to stable from negative and affirmed the Financial Strength Rating (FSR) of B (Fair) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bb” (Fair) of American Federated Insurance Company (AFIC ). Concurrently, AM Best has affirmed the FSR of B (Fair) and the Long-Term ICR of “bb” (Fair) of American Federated Life Insurance Company (AFLIC). The outlook of these Credit Ratings (ratings) is negative. Both companies are known collectively as American Federated Insurance Companies and are domiciled in Flowood, MS.
The ratings of AFIC reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and marginal enterprise risk management (ERM). The ratings also reflect drag from the parent holding company, First Tower Finance Company LLC (First Tower Finance).
The ratings of AFLIC reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and marginal ERM. The ratings also reflect drag from the parent holding company, First Tower Finance.
The American Federated Insurance Companies are indirect, wholly owned subsidiaries of First Tower Finance, a multiline specialty finance company. Prospect Capital Corporation [NASDAQ: PSEC]a publicly traded closed-end investment company, indirectly owns an 80.1% majority interest in First Tower Finance and its subsidiaries.
AFIC provides credit insurance coverage on collateralized personal loans originated by the consumer finance subsidiaries of First Tower Finance, and involuntary unemployment insurance. AFLIC provides credit life and credit accident and health insurance coverages for the same individuals.
The drag on the ratings of AFIC and AFLIC reflects the considerable financial leverage with a deficit in members’ equity at First Tower Finance. AM Best’s expectation is that the high financial