A.M. Best Comments on Credit Ratings of AmTrust Financial Services, Inc. Following Series of Announcements
02 Março 2018 - 4:44PM
Business Wire
A.M. Best has commented that the Long-Term Issuer Credit
Rating (Long-Term ICR) of “bbb” of AmTrust Financial Services,
Inc. (AFSI) [NASDAQ: AFSI] (headquartered in New York, NY) and
all associated Long-Term Issue Credit Ratings and indicative
Long-Term Issue Credit Ratings, as well as the Long-Term ICRs and
Financial Strength Ratings of its operating subsidiaries are
unchanged by recent announcements regarding the closing of the sale
of a 51% interest in a portion of AFSI’s U.S.-based fee businesses;
the sale of the company to Evergreen Parent, L.P., an investor
group comprised of various equity funds managed by Stone Point
Capital, LLC and members of the Karfunkel and Zyskind families; and
the filing of a Form 12b-25 related to its Form 10-K for the year
ended Dec. 31, 2017. These Credit Ratings (ratings) remain under
review with negative implications.
As a result of the sale of the interest in the U.S.-based fee
business, AFSI will receive an infusion of cash and achieve a
material reduction in the goodwill and intangible assets that
represented a significant portion of assets as of the company’s
most recent financial filings. These factors will strengthen the
company’s balance sheet and provide tangible resources to support
the insurance operations. Through its continuing ownership of a 49%
interest in the newly created company, The Amynta Group, AFSI
continues to have exposure to a significant private asset with
modest liquidity characteristics. However, the sale does provide a
basis for valuation of that asset and AFSI will have the
opportunity to benefit from future profitable operations of the new
company. A.M. Best is working with management to assess the impact
of the closing on risk-adjusted capitalization.
Under the terms of a definitive agreement announced on March 1,
2018, Evergreen Parent, L.P., which has been formed by private
equity funds managed by Stone Point Capital LLC (Stone Point) along
with Barry D. Zyskind, Chairman and CEO of AmTrust, George
Karfunkel and Leah Karfunkel (collectively, the Karfunkel-Zyskind
Family), will acquire the approximately 45% of AFSI’s issued and
outstanding common shares not currently owned or controlled by the
Karfunkel-Zyskind Family and certain affiliated and related
parties. The transaction values the fully diluted equity at $2.7
billion, exclusive of AFSI’s outstanding preferred stock, which is
expected to remain outstanding with continued listing on the New
York Stock Exchange. The deal is expected to close during the
second half of 2018, subject to the approval of a majority of
AFSI’s shares not owned or controlled by the Karfunkel-Zyskind
Family, their children, senior management or their respective
affiliates and certain related parties, as well as receipt of all
necessary regulatory approvals.
A.M. Best does not view the transfer of AFSI to private from
public ownership as material to the ratings in and of itself. While
the financial flexibility afforded by access to public capital
markets is viewed positively within the ratings process, the
company’s ability to leverage that benefit has been strained by
recent events. As it is expected that the company will continue to
prepare and submit financial statements to support the public
listing of its preferred shares, the company will have continued
costs associated with being a public filer. A.M. Best views the
opportunity for AFSI’s management to focus on long-term actions to
strengthen capital, improve underwriting and pricing tools and
discipline, refocus operations and develop and implement necessary
infrastructure improvements under a private structure as a positive
for the organization over the near to medium term.
Recognizing that the Securities and Exchange Commission allows
for an automatic 15-day extension of its March 1, 2018, filing
deadline upon request, A.M. Best does not view the filing of a form
12b-25 by AFSI as cause for rating action. However, this is the
second consecutive use of the extension by the company for an
annual filing and reflects the strain on resources to support the
completion of the various major transactions in which the company
has been involved. Should the March 16 deadline be missed, there is
heightened potential for negative rating action.
The ratings of AFSI and its operating insurance companies were
placed under review with negative implications on Nov. 6, 2017. At
the time, A.M. Best indicated that the ratings would remain under
review until:
- the close of the sale of the fee
businesses and A.M. Best’s assessment of the impact of the final
closing terms on risk-adjusted capital is completed; and
- AFSI files its year-end 2017
financials, and A.M. Best assesses the full-year reserve
information to determine appropriate capital charges associated
with enterprise reserves.
As noted above, while the fee business sale has closed, A.M.
Best’s review of the impact of the transaction is continuing. In
addition, A.M. Best awaits the year-end 2017 financials. A.M. Best
will continue to monitor developments and take rating action as
conditions warrant.
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.
A.M. Best is the world’s oldest and most authoritative
insurance rating and information source. For more information,
visit www.ambest.com.
Copyright © 2018 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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version on businesswire.com: http://www.businesswire.com/news/home/20180302005635/en/
A.M. BestJennifer Marshall, CPCU, ARM, +1
908-439-2200, ext.
5327Directorjennifer.marshall@ambest.comorMichael J.
Lagomarsino, CFA, FRM, +1 908-439-2200, ext. 5810Senior
Directormichael.lagomarsino@ambest.comorChristopher Sharkey,
+1 908-439-2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorJim Peavy, +1
908-439-2200, ext. 5644Director, Public
Relationsjames.peavy@ambest.com
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