Best’s News & Research Service - August 29, 2018 03:33 PM (EDT)
A.M. Best Revises Outlooks to Positive for Members of Ally Insurance Group
- August 29, 2018 03:33 PM (EDT)
Oldwick //BestWire// - A.M. Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Ratings of “bbb+” of the members of the Ally Insurance Group (Ally Insurance). The members include Motors Insurance Corporation and its reinsured subsidiaries, MIC Property and Casualty Insurance Corporation and CIM Insurance Corporation, as well as an affiliate, Ally International Insurance Company, Ltd. (AIICL). All companies are domiciled in Detroit, MI, except AIICL, which is domiciled in Bermuda.
These Credit Ratings (ratings) reflect Ally Insurance’s balance sheet strength, which A.M. Best categorizes as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. These positive rating factors are offset somewhat by the credit profile of its ultimate parent, Ally Financial Inc. (Ally Financial), which is rated below investment grade by other nationally recognized statistical rating organizations (NRSRO). However, A.M. Best has placed a positive outlook on Ally Insurance’s ratings due to an improvement in its parent’s NRSRO ratings, and a narrowing of Ally Financial’s credit default swap (CDS) spread.
Ally Insurance has a well-established market presence as a specialized writer of vehicle service contracts (VSC), but as a result has a concentration of underwriting risk in auto warranty lines. Ally Insurance’s positive rating attributes are derived from management’s focused operating strategy, extensive product knowledge and established track record of solid earnings generated from its long-term VSC business. The group has consistently generated capital through operating earnings, which is reflective of disciplined underwriting and a steady stream of investment income and realized gains. Although results in recent years have been marred by losses in its automobile physical damage line due to severe weather events, the company has taken steps to mitigate this variability through reinsurance. The ratings also consider the group’s higher than average expense structure. Management is committed to maintaining the strongest level of risk-adjusted capitalization, which is supportive of its ratings.
The positive outlooks reflect the impact of Ally Financial’s improved financial condition and the potential for further improvement as credit default swap spreads and financial leverage ratios continue to decline.
Other factors that may lead to positive rating action include improved and sustainable underwriting and operating performance that outperforms peers and the property/casualty industry throughout the underwriting cycle. Positive rating actions may occur from an improvement in the ratings of Ally Financial. Negative rating action may occur from significant weakening of risk-adjusted capitalization, deterioration in the operating performance or a downgrade in the ratings of Ally Financial.
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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