AM Best Revises Outlooks to Stable for American Federated Life Insurance Company; Affirms Credit Ratings of American Federated Insurance Company

OLDWICK, N.J.--(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 Life Insurance Company (AFLIC). Concurrently, AM Best has affirmed the FSR of B (Fair) and the Long-Term ICR of “bb” (Fair) of American Federated Insurance Company (AFIC). The outlook of these Credit Ratings (ratings) is stable. Both companies are known collectively as American Federated Insurance Companies and are domiciled in Flowood, MS.

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 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 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 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] has majority ownership in First Tower Finance and its subsidiaries.

AFLIC provides credit life, credit accident and health insurance coverages for individuals that have personal loans originated by the consumer finance subsidiaries of First Tower Finance.

AFIC provides credit insurance coverage on collateralized personal loans originated by the consumer finance subsidiaries of First Tower Finance, and credit involuntary unemployment insurance.

Given the products offered by the two companies, AM Best will continue to monitor the impact of the macroeconomic environment on the business profiles and operations of AFIC and AFLIC.

The drag on the ratings of AFIC and AFLIC reflects the high interest expenses and considerable financial leverage with a deficit in members’ equity at First Tower Finance. AM Best’s expectation is that the high financial leverage and interest expenses of First Tower Finance will not create additional pressure on American Federated Insurance Companies’ balance sheets in the near or immediate term.

The stable outlooks of AFIC and AFLIC reflect AM Best’s expectation that the companies will maintain adequate operating results and overall balance sheet strength assessment.

This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2023 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Christine DePalma, CPCU, ASLI

Financial Analyst

+1 908 882 1732

[email protected]

Robert Raber, AIAF, ASLI

Director

+1 908 882 2261

[email protected]

Christopher Sharkey
Associate Director, Public Relations

+1 908 882 2310

[email protected]

Al Slavin
Senior Public Relations Specialist

+1 908 882 2318

[email protected]

Source: AM Best