AM Best Revises Outlooks to Stable for American Federated Insurance Company and American Federated Life Insurance Company

AM Best has revised the outlooks to stable from negative and affirmed the Financial Strength Rating of B (Fair) and the Long-Term Issuer Credit Rating of "bb" of American Federated Insurance Company (AFIC) and American Federated Life Insurance Company (AFLIC). Both companies are known collectively as American Federated Insurance Companies, and are domiciled in Flowood, MS.

The ratings of AFIC reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, limited business profile and marginal enterprise risk management. The ratings also reflect drag from the parent holding company, First Tower Finance Company LLC (First Tower Finance).

The ratings of AFLIC reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile and marginal enterprise risk management. The ratings also reflect ratings drag from AFIC, the lead rating unit.

The American Federated Insurance Companies are indirect, wholly owned subsidiaries of First Tower Finance, a multiline specialty finance company. Prospect Capital Corporation PSEC, a publicly traded closed-end investment company, indirectly owns an 80.1% majority interest in First Tower Finance and its subsidiaries.

AFIC provides credit insurance coverage on collateralized personal loans originated by the consumer finance subsidiaries of First Tower Finance. The drag to the ratings of AFIC and AFLIC is reflective of the considerable financial leverage with a deficit in members' equity at First Tower Finance, stemming from a 2014 transaction involving the return of First Tower Finance's capital to its members. The outlook revisions to stable for AFIC reflect consistently strong operating results in the last five years and the expectation that this trend will continue and that the parent company will not create additional pressure on AFIC's balance sheet in the near to midterm.

AFLIC provides credit life and credit accident and health insurance coverages for individuals that have personal loans originated by the consumer finance subsidiaries of First Tower Finance. The outlook revisions to stable reflect the company's very strong risk-adjusted capitalization, its continued profitable operating results and the expectation that the parent will not create additional pressure on AFLIC's balance sheet in the near to midterm.

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 Understanding 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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