A.M. Best Affirms Credit Ratings of American Federated Insurance Company

Business Wire

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best has affirmed the Financial Strength Rating of B (Fair) and the Long-Term Issuer Credit Rating of “bb” of American Federated Insurance Company (AFIC) (Flowood, MS). The outlook of these Credit Ratings (ratings) remains negative.

The ratings reflect AFIC’s balance sheet strength, which A.M. Best categorizes as weak, as well as its strong operating performance, limited business profile and marginal enterprise risk management.

AFIC is an indirect, wholly owned subsidiary of First Tower Finance Company LLC (First Tower Finance), a multi-line 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.

The weak balance sheet strength assessment is reflective of the considerable financial leverage with a deficit in members’ equity at First Tower Finance, stemming from a 2014 transaction involving the return of First Tower Finance’s capital to its members. The outlooks reflect the significant financial leverage at First Tower Finance, an intermediate holding company, and the potential for this to create pressure on AFIC for additional dividends or increased expense sharing.

Negative rating actions could occur if the financial condition of First Tower Finance weakens significantly. In addition, negative rating actions could occur should Prospect Capital Corporation fail to provide adequate support for First Tower Finance and its subsidiaries.

This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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A.M. Best

Robert Valenta, +1 908 439 2200, ext. 5291

Senior Financial Analyst

robert.valenta@ambest.com

or

Raymond Thomson, CPCU, ARe, ARM

+1 908 439 2200, ext. 5621

Associate Director

raymond.thomson@ambest.com

or

Christopher Sharkey, +1 908 439 2200, ext. 5159

Manager, Public Relations

christopher.sharkey@ambest.com

or

Jim Peavy, +1 908 439 2200, ext. 5644

Director, Public Relations

james.peavy@ambest.com