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FOR IMMEDIATE RELEASE
OLDWICK - MAY 25, 2017 11:32 AM (EDT)
A.M. Best has affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” of the operating subsidiaries of Fortegra Financial Corporation (Fortegra). Fortegra is a wholly owned subsidiary of Tiptree Financial Inc. [NASDAQ: TIPT]. The property/casualty operating subsidiaries of Fortegra include Lyndon Southern Insurance Company (Wilmington, DE), Insurance Company of the South (Athens, GA) and Response Indemnity Company of California (Redondo Beach, CA), which operate under an intercompany pooling agreement and are collectively referred to as Fortegra P&C Group. The life/health operating subsidiaries of Fortegra include Life of the South Insurance Company (Athens, GA); Bankers Life of Louisiana (Marksville, LA) and Southern Financial Life Insurance Company (Scottsville, KY), which are collectively referred to as the Life of the South Group. The outlook of these Credit Ratings (rating) remains stable.
The ratings reflect Fortegra P&C Group’s solid risk-adjusted capitalization, historically profitable operating performance of their core book of business and its niche distribution channels. Partially offsetting these positive rating factors are the limited scope of the group’s operations, considerable growth in direct writings over the current five-year period and heavy reliance on third-party reinsurance, as evidenced by the group’s elevated gross and ceded underwriting leverage measures. However, the associated credit risk related to the group’s reliance on third-party reinsurance recoverables is mitigated by the credit quality of its rated reinsurers and collateralization of the recoverables due to non-rated entities.
The ratings of the Life of the South Group acknowledge its sufficient consolidated risk-adjusted capitalization. The ratings also recognize the group’s positive net operating performance, derived primarily from its core credit life and credit accident and health businesses, as well as the positive trends in premium growth. Somewhat offsetting these rating factors are the Life of the South Group’s limited business profile, although the group continues to expand its product offerings and distribution capabilities. A.M. Best believes the group may be challenged to sustain and improve its net operating performance given the challenges of the persistent low interest rate environment and the expense strains expected from anticipated new business growth.
While the members of Fortegra are well-positioned at the current rating level, negative rating action could occur if underwriting and operating performance fall markedly short of A.M. Best’s expectations, if there is a significant weakening of risk-adjusted capitalization, or if there is deterioration in the quality of Fortegra’s consolidated balance sheet, including, but not limited to, an increase in financial leverage or an increase in the ratio of intangible assets to stockholders’ equity.
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.
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