A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a” of the property/casualty subsidiaries of AmTrust Financial Services, Inc. (AFSI) (headquartered in New York, NY) [NASDAQ: AFSI], also known as AmTrust Group (AmTrust). Concurrently, A.M. Best has affirmed the ICR of “bbb” of AFSI. The outlook for all ratings is stable. (See below for a detailed list of the companies and ratings.)
The rating actions reflect AmTrust’s balance sheet strength, consistently profitable underwriting and operating performance within its niche market segments as well as access to additional capital from its parent, AFSI, if needed to support AmTrust’s expanding operations. AmTrust has been successful in executing its business plan, which is focused on growth through the acquisition of companies, renewal rights offerings and established books of business at appropriate rates, terms and conditions. This enables AmTrust to further benefit from its expandable underwriting platform to drive expense savings.
Partially offsetting these positive rating factors are AmTrust’s continued significant growth in both premium volume and associated liabilities over the current five-year period, primarily achieved from acquisitions that are either through renewal rights transactions or outright purchases of companies; the inherent risk associated with expansion into new markets; and integrating new business and adverse loss reserve development in recent calendar years, especially in the workers’ compensation line of business.
AFSI’s adjusted debt-to-total capital, excluding accumulated other comprehensive income of 17% and its adjusted debt-to-tangible capital, excluding accumulated other comprehensive income of 26% at year-end 2012, (the group continues to maintain a sizeable 41.2 % of equity in goodwill and intangible assets) which were within A.M. Best’s expectations at its current rating level, combined with the company’s access to a $200 million credit facility and non-operating company dividend capacity, provide ample liquidity to meet its corporate obligations. AFSI maintains a strong interest coverage ratio that is well within A.M. Best’s guidelines for its ratings.
Key rating factors that may lead to future positive rating actions include the organization outperforming its peers for an extended period. However, negative rating actions could result if the group’s operating performance falls markedly short of A.M. Best’s expectations or if risk-adjusted capitalization significantly declines.
The FSR of A (Excellent) and ICRs of “a” have been affirmed for the following property/casualty subsidiaries of AmTrust Financial Services, Inc.:
- AmTrust International Insurance, Ltd.
- Technology Insurance Company, Inc.
- Rochdale Insurance Company
- Wesco Insurance Company
- Milwaukee Casualty Insurance Company
- Security National Insurance Company
- AmTrust Insurance Company of Kansas
- AmTrust Lloyd’s Insurance Company of Texas
- AmTrust International Underwriters Limited
- AmTrust Europe Limited
- Associated Industries Insurance Company, Inc.
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.
Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
Senior Financial Analyst
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Michael Lagomarsino, CFA
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