Best’s News & Research Service - August 01, 2018 03:04 PM (EDT)
A.M. Best Upgrades Credit Ratings of the Members of AAA Life Group
- August 01, 2018 03:04 PM (EDT)
Oldwick //BestWire// - A.M. Best has upgraded the Financial Strength Rating (FSR) to A (Excellent) from A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) to “a” from “a-” of AAA Life Insurance Company (AAA Life) (Livonia, MI), AAA Life Insurance Company of New York (Harrison, NY) and the companies affiliated with AAA Life (collectively referred to as the AAA Life Group). The outlook of these Credit Ratings (ratings) has been revised to stable from positive. See below for a detailed listing of affiliated reinsurers.
The ratings reflect AAA Life Group’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. The ratings also consider rating enhancement from Auto Club Enterprises Insurance Group of Southern California.
AAA Life Group’s ratings reflect the strong brand name recognition of American Automobile Association, Inc., as well as access to its large membership base, diversified distribution and strongest risk-adjusted capitalization. The group’s investment portfolio is of good credit quality, with holdings predominantly in bonds and minimal holdings in stocks, mortgages and BA assets. As a result of its direct mail and other initiatives along with diversified product offerings, AAA Life’s direct written premiums have trended upward in recent years.
The group has generated positive pre-tax statutory operating earnings in recent years, with the exception of 2017, primarily due to new business strain. In addition, A.M. Best expects statutory earnings to trend positive over the near to medium term.
AAA Life writes all new insurance business and reinsures the business on a coinsurance basis to designated members of AAA Life Group, as contracted by shareholder and management agreements. AAA Life manages the full administration, investment and insurance operations of all affiliated reinsurers. As a result, A.M. Best considers that all members of AAA Life Group operate as a group.
However, due to the nature of the existing ownership structure and business arrangement, AAA Life does not have a majority ownership, nor does it retain board control of the reinsurance members of the AAA Life Group.
AAA Life Group receives rating enhancement, due to its strategic importance to the auto club owners as evidenced by recent and historical capital contributions, enabling AAA Life group to fund its new business growth.
Partially offsetting these positive rating factors are the impact of new business strain, which includes the impact of Regulation XXX reserving on statutory earnings, and an elevated amount of below-investment-grade holdings compared with the industry average.
The FSR has been upgraded to A (Excellent) from A- (Excellent) and the Long-Term ICRs to “a” from “a-” with a stable outlook for the following affiliated reinsurers of AAA Life Insurance Company:
- Auto Club Life Insurance Company
- Automobile Club of Southern California Life Insurance Company
- AAA Life Re, Ltd.
- Pacific Beacon Life Reassurance Inc.
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.
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