A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit ratings of “a” of American Southern Group (American Southern) and its members. These ratings apply to American Southern Insurance Company (Topeka, KS) and its wholly owned and 100% reinsured subsidiary, American Safety Insurance Company. Additionally, A.M. Best has affirmed the FSR of B++ (Good) and ICR of “bbb+” of Bankers Fidelity Life Insurance Company (Bankers Fidelity). Concurrently, A.M. Best has affirmed the ICR of “bbb-” of the parent company, Atlantic American Corporation (Atlantic American) [NASDAQ: AAME]. The outlook for all ratings is stable. All companies are domiciled in Atlanta, GA, unless otherwise specified. American Southern’s ratings reflect its strong risk-adjusted capitalization, long history of profitability, management’s disciplined underwriting approach, its historically conservative loss reserving practices and local market knowledge. Somewhat offsetting these positive rating factors is American Southern’s history of paying substantial stockholder dividends, which historically have been used to service the debt held at Atlantic American. The stable outlook reflects A.M. Best’s expectation that a solid level of profitability will be maintained over the near term, further supporting risk-adjusted capitalization. The affirmation of Bankers Fidelity’s ratings and outlook recognizes its continued strong risk-adjusted capital position, improved investment portfolio and growth in its senior life business. The company continues to emphasize the sale of senior life and niche individual life business while maintaining its Medicare supplement presence. The ratings also consider the financial leverage and interest coverage of Atlantic American. Although leverage measures have somewhat detracted from the ratings in prior years, they improved significantly in recent years as Atlantic American retired a portion of its outstanding preferred stock and bank debt with the proceeds from the 2008 sale of two former subsidiaries ( Georgia Casualty & Surety Company and Association Casualty Insurance Company). In all, adjusted debt-to-capital and interest coverage ratios were roughly 21% and 1.2 times, respectively, at June 30, 2010. Interest coverage is slightly below expectations for the given rating level; however, this is offset by the insurance operating companies’ ability to historically generate sufficient earnings to cover debt obligations at the parent company. In addition, Atlantic American also holds roughly $24 million of cash and marketable investments at June 30, 2010. The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition , which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; “ Rating Members of Insurance Groups”; “Rating Health Insurance Companies”; “Update to BCAR for Life & Heath Insurers”; and “ A.M. Best’s Ratings & the Treatment of Debt.” Methodologies can be found at www.ambest.com/ratings/methodology. Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.
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