Press Release - JANUARY 31, 2013

A.M. Best Downgrades Ratings of Auto Club Insurance Association and its Insurance Subsidiaries

Kenneth Tappen
Senior Financial Analyst
(908) 439-2200, ext. 5248

Joseph Burtone
Assistant Vice President
(908) 439-2200, ext. 5125

Rachelle Morrow
Senior Manager, Public Relations
(908) 439-2200, ext. 5378

Jim Peavy
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644


OLDWICK, N.J. - JANUARY 31, 2013
A.M. Best Co. has downgraded the financial strength rating (FSR) to A- (Excellent) from A (Excellent) and the issuer credit ratings (ICR) to “a-” from “a” of Auto Club Insurance Association (ACIA) (headquartered in Dearborn, MI) and its insurance subsidiaries. The outlook for all ratings has been revised to stable from negative. (See below for a detailed listing of the companies.)

The downgrading of the ratings is based on the deterioration in ACIA’s underwriting results and operating earnings, which has led to a decline in policyholders’ surplus in recent years. The deterioration in underwriting results was driven by unfavorable loss experience for private passenger auto liability and non-Michigan business, as well as an increased frequency and severity of homeowner weather losses. In addition, the group maintains above-average non-affiliated investment leverage, driven by its investment holdings in unaffiliated common stock and bank loans, which equate to approximately 30% of surplus, and its non-investment grade bond holdings, which equate to approximately 10% of surplus.

ACIA's ratings and outlook reflect its strong risk-adjusted capitalization and well-established position as a personal lines market leader in Michigan, as well as the benefits derived from offering insurance products to American Automobile Association (AAA) members. The group's strong risk-adjusted capitalization is driven by its moderate underwriting leverage, partially offset by its above average non-affiliated investment leverage and moderate gross and net catastrophe exposure. These positive attributes are derived from ACIA's AAA affiliation, through which it writes a controlled book of business with a select class of policyholders. Management remains focused on improving its competitive position in Michigan, and by acquiring Meemic Insurance Company in 2009 and Fremont Insurance Company in 2011, it has further diversified its distribution channels and targeted audience in Michigan.

ACIA has recently implemented numerous strategic initiatives to improve underwriting performance, which included private passenger auto and homeowner rate adjustments in states where they were indicated; increased pricing sophistication and product enhancements to improve profitability and competitive position; refinements to underwriting guidelines and modifications to its reinsurance program.

Additional negative rating actions could occur from continued deterioration in ACIA’s operating performance and policyholders' surplus, resulting in a material decline in risk-adjusted capitalization.

The FSR has been downgraded to A- (Excellent) from A (Excellent) and ICRs to “a-” from “a” for Auto Club Insurance Association and its following insurance subsidiaries:

· MemberSelect Insurance Company

· Auto Club Group Insurance Company

· Meemic Insurance Company

· Fremont Insurance Company

· Auto Club Property/Casualty Insurance Company

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. Key criteria utilized include: “Rating Members of Insurance Groups”; “Risk Management and the Rating Process for Insurance Companies”; “Catastrophe Analysis in A.M. Best Ratings”; and “Understanding BCAR for Property/Casualty Insurers.” Best’s Credit Rating Methodology can be found at

Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source.

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