Standard & Poor's said it has learned from more than one source that the New York State Insurance Department disallowed the interest payment.
Atlantic Mutual's net loss of $4.6 million for the six months ended June 30, 2006, was greater than the net loss of $1.9 million for the three months ended March 30, 2006, demonstrating continued weakness in earnings.
"Based on year-to-date results, we believe Atlantic Mutual is unlikely to meet our prior expectations of earnings of at least 1x interest coverage," said Standard & Poor's credit analyst Jason A. Jones.
Another surplus notes issue in the amount of $15 million has interest due shortly, and Standard & Poor's believes it is likely that Atlantic Mutual will default on this payment as well.