Atlas Financial Holdings, Inc. AFH and its units’ ratings were reiterated by A.M. Best. The rating agency affirmed the Financial Strength Rating (FSR) of B (Fair) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “bb” for American Service Insurance Company, Inc., American Country Insurance Company and Gateway Insurance Company. Together, the three companies are referred to as American Service Pool (ASI Pool), working under an intercompany reinsurance pooling agreement. They form the units of property and casualty (P&C) insurer, Atlas Financial. Notably, the outlook of the aforementioned ratings remained stable.
At the same time, the credit rating giant affirmed the Long-Term ICR of “b-” for Atlas Financial, with the outlook of the rating remaining stable. Additionally, the rating agency affirmed the FSR of B+ (Good) and the Long-Term ICR of “bbb-” for Atlas Financial’s wholly owned subsidiary, Global Liberty Insurance Company of New York. The outlook of such ratings remains negative.
Ratings Representation of ASI Pool
The ratings affirmations of the ASI Pool members represent an inconsistent and weak risk adjusted capital position of the group. Also, the ratings affirmations denote the group’s sub-par investment yields and the returns on its investment portfolio, besides the recent trajectory of recording adverse prior-year loss reserve development.
However, gradual improvement in underwriting and operational performance over the past few years, along with management’s substantial experience and competence in its niche market, serving the public’s “for hire” auto market, might partially offset the aforementioned negative rating factors.
In future, ASI pool can expect to see a positive rating action on the back of its improving operational performance or additional improvement in the risk-adjusted capitalization levels. However, a slump in the pool’s underwriting and operational performance, declining risk-adjusted capitalization level that cannot support the current ratings, along with a trend of recording material unfavorable loss reserve development, might result in negative rating action.
Details Behind the Ratings of Global Liberty Insurance
The ratings affirmation of Global Liberty Insurance represents its experience within the New York City metropolitan area’s for-hire-livery vehicle market and a robust capital position.
However, the unit’s unstable underwriting and operational performance in recent years has partially offset the abovementioned positive rating factors.
Notably, the Global Liberty Insurance’s negative outlook signifies the rating agency’s distress relating to the adequacy of the unit’s loss reserves as well as the current volatility in its underwriting and operational performance.
Rating affirmations or upgrades from credit rating agencies play an important role in retaining investor confidence plus maintaining a stock’s credit worthiness. On the other hand, rating downgrades not only damage business but also increase the cost of future debt issuances. We believe that such ratings will help Atlas Financial retain investors’ trust and write more businesses going forward.
Zacks Rank and Share Price Movement
Currently, Atlas Financial sports a Zacks Rank #1 (Strong Buy). Shares of Atlas Financial have rallied 20.8% quarter to date, significantly outperforming the industry’s 5.5% increase. We expect top-line growth, improving premiums and a solid capital position to drive the shares higher in the near term.
Other Stocks to Consider
Investors interested in other top-ranked stocks from the insurance industry can consider First American Financial Corporation FAF, CNO Financial Group, Inc. CNO and Cincinnati Financial Corporation CINF.
First American Corporation provides financial services. The company delivered positive surprises in all the last four quarters with an average beat of 12.64%. The company sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
CNO Financial develops, markets and administers health insurance, annuity, individual life insurance and other insurance products for senior and middle-income markets in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 6.69%. The company holds a Zacks Rank #2 (Buy).
Cincinnati Financial deals in property casualty insurance business in the United States. The company delivered positive surprises in all of the last four quarters with an average beat of 14.97%. The company carries a Zacks Rank #2.
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