AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICRs) of “a” (Excellent) of American Southern Insurance Company (Topeka, KS), and its wholly owned and 100% reinsured subsidiary, American Safety Insurance Company, (collectively referred to as American Southern Group). Additionally, AM Best has affirmed the FSR of A- (Excellent) and the Long-Term ICRs of “a-” (Excellent) of Bankers Fidelity Life Insurance Company, and its wholly owned and 100% reinsured subsidiaries, Bankers Fidelity Assurance Company and Atlantic Capital Life Assurance Company, (collectively referred to as Bankers Fidelity Life Insurance Group [BFLIG]). Concurrently, AM Best has affirmed the Long-Term ICR of “bbb-” (Good) of the publicly traded parent company, Atlantic American Corporation (Atlantic American) [NASDAQ: AAME]. All companies are domiciled Atlanta, GA, unless otherwise specified. The outlook of these Credit Ratings (ratings) is stable.

The ratings of American Southern Group reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

American Southern Group’s balance sheet strength is supported by the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), moderate underwriting leverage and an appropriate reinsurance program. Financial flexibility is sufficient considering the group’s strongest BCAR scores and access to capital markets through Atlantic American. These positive rating factors are partially offset by the group’s substantial annual stockholder dividend payments to Atlantic American, who uses it to service its debt. The ratings also consider the financial leverage and interest coverage at Atlantic American, with an adjusted debt-to-capital ratio of 19.9% as of Sept. 30, 2024. The interest coverage ratios benefit from a trend of underwriting and operating earnings in the insurance operating companies.

American Southern Group has exhibited operating profitability historically over the last decade, driven by positive underwriting and net investment incomes. Underwriting results have been profitable since 2014, attributed to management’s disciplined underwriting approach and local market expertise. However, an underwriting loss was reported through the first nine months of 2024, driven by a higher frequency and severity of auto liability claims. This was partially offset by favorable reserve development in general liability and lower loss adjusted expenses from reduced claims costs. The neutral business profile assessment reflects American Southern Group’s established position as an experienced writer of specialty program business, primarily for state governments, local municipalities and other large motor pools and fleets.

The ratings of BFLIG reflect its balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, neutral business profile and appropriate ERM.

BFLIG maintains the strongest level of risk-adjusted capitalization, as measured by BCAR, for its insurance, investment and business risks. The impact of volatile operating results in recent years on capital and surplus levels has been offset by substantial capital contributions from Atlantic American. Balance sheet strength is enhanced by access to an undrawn external borrowing capacity and sufficient liquidity metrics. Fluctuating operating performance was driven by varying Medicare supplement underwriting results. Corrective actions, including rate increases, more stringent underwriting and business diversification to lower risk ancillary health and life products, drove positive underwriting results in the two years before 2024. However, the organization reported unfavorable underwriting results in 2024, owing to elevated expenses and a higher Medicare supplement loss ratio. BFLIG’s neutral business profile reflects the continued diversification of its business via growth of ancillary health and life premiums and further contraction of its Medicare supplement segment. The ratings also reflect BFLIG’s strategic role within the Atlantic American organization.

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