A.M. Best Co. has affirmed the financial strength rating of B (Fair) and issuer credit ratings (ICR) of "bb" of American Service Insurance Company, Inc., American Country Insurance Company (both domiciled in Elk Grove Village, IL) and Gateway Insurance Company (St. Louis, MO), collectively referred to as American Service Pool (ASI Pool). These companies are subsidiaries of Atlas Financial Holdings, Inc. (Atlas) (Cayman Islands) (NASDAQ:AFH), and operate under an intercompany reinsurance pooling agreement. Concurrently, A.M. Best has affirmed the ICR of "b-" of Atlas. The outlook for all ratings is stable.

The rating affirmations reflect ASI Pool's historically weak operating performance, which occurred under the prior owners of its insurance subsidiaries, its marginal risk-adjusted capitalization (as a result of significant growth in recent quarters) and the execution risk associated with management's refocusing on its core lines of business while attempting to meet business plans and grow its premiums. This effort was made during a time of competitive market conditions, as well as during the run-off of unprofitable business written while ASI Pool was under the control of its prior owners.

These negative rating factors are partially offset by ASI Pool's extensive experience in the commercial auto lines of business. The improved earnings in 2012 and 2013, demonstrate progress in connection with Atlas' strategic focus, as management focuses on historically profitable lines of business and run-offs its non-core lines and books produced by general and managing general agents.

While A.M. Best believes the ratings and outlook of ASI Pool are well positioned at the current level, factors that may lead to negative rating actions include deterioration in underwriting and operating performance, an increased magnitude of adverse loss reserve development and a decline in ASI Pool's risk-adjusted capital position. Factors that may lead to positive rating actions include stabilization of ASI Pool's loss reserve position, continually improving operating profitability and enhanced risk-adjusted capitalization.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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