AM Best has upgraded the Financial Strength Rating (FSR) to B (Fair) from B- (Fair) and the Long-Term Issuer Credit Ratings (Long-Term ICR) to "bb" from "bb-" of the subsidiaries of First Acceptance Corporation (collectively referred to as First Acceptance) (Delaware) [OTCQX: FACO]. (See below for a detailed list of companies). Concurrently, AM Best has upgraded the Long-Term ICR to "b-" from "ccc+" of First Acceptance Corporation. The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect First Acceptance’s balance sheet strength, which AM Best categorizes as adequate, as well as its marginal operating performance, limited business profile and marginal enterprise risk management.
The rating upgrades reflect an upward revision in the group’s balance sheet strength assessment. This movement was a result of the group’s favorable pre-tax operating income and positive net income over the past three years, which resulted in policyholder surplus growth. While surplus growth was tempered in 2019 due to the payment of an extraordinary capital distribution to the parent for the repayment of outstanding debt, risk-adjusted capitalization has improved considerably. Additionally, as a result of the capital distribution, financial leverage at the holding company has declined. Strategic reductions in premium volume during the same time frame have resulted in lower underwriting leverage ratios.
The FSR has been upgraded to B (Fair) from B- (Fair) and the Long-Term ICRs to "bb" from "bb-" of the following pooled subsidiaries of First Acceptance Corporation:
First Acceptance Insurance Company, Inc.
First Acceptance Insurance Company of Georgia, Inc.
First Acceptance Insurance Company of Tennessee, Inc.
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 media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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