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FOR IMMEDIATE RELEASE
OLDWICK - AUGUST 03, 2017 08:48 AM (EDT)
A.M. Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICRs) of “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). See below for a detailed listing of affiliated reinsurers.
AAA Life Group’s ratings reflect the strong brand name recognition of the American Automobile Association, Inc., as well as access to its large automobile club member base, diversified distribution and financial resources. The group’s risk-adjusted capital position is more than sufficient to support its business, investment and insurance risks. The 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 efforts and diversified product offerings, AAA Life’s ordinary life premiums have trended upward in recent years.
Additionally, the positive outlooks reflect operating results that consistently have been positive on a GAAP basis and are trending favorably on a statutory basis, with positive operating results in each of the prior three years. AAA Life expects statutory results to continue to improve in 2017 and beyond based on the maturity of its in-force business and implementation of principle-based reserves.
AAA Life writes all new insurance business and reinsures premiums on a quota-share 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. A.M. Best deviated from its “Rating Members of Insurance Groups” methodology by providing the reinsurers of AAA Life Group with rating enhancement from AAA Life. As prescribed by the methodology, to be eligible for rating enhancement, an individual company must have a parent with majority ownership, operate under common ownership with the entity providing lift or maintain board control together with common management. In this case, while there is some common management within the group, the respective reinsurance company boards are independent of AAA Life and lack common ownership among the group members.
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 of A- (Excellent) and the Long-Term ICRs of “a-” have been affirmed for AAA Life Insurance Company and its following affiliated reinsurers:
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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