A.M. Best Affirms Credit Ratings of AAA Life Insurance Company and its Affiliates

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best has affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Ratings (ICR) 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). The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed listing of affiliated reinsurers.)

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.

AAA Life Group’s ratings reflect the strong brand name recognition of the American Automobile Association, 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 most holdings in bonds and minimal holdings in stocks, real estate, 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.

Partially offsetting these positive rating factors are the impact of new business strain, which includes the impact of Regulation XXX reserving on statutory earnings, AAA Life’s ongoing exposure to interest-sensitive liabilities associated with the fixed annuity block of business and a relatively high amount of below investment grade holdings compared with the industry average. Operating results have been consistently positive on a GAAP basis and are trending favorably on a statutory basis with positive operating results in each of the prior two years. AAA Life expects statutory results to continue to improve in 2017 and beyond based on the maturity of its in-force business and planned implementation of principle-based reserves.

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:

• 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.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2016 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.

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A.M. Best

Steve Vincent, +1 908-439-2200, ext. 5802

Senior Financial Analyst

steve.vincent@ambest.com

or

Christopher Sharkey, +1 908-439-2200, ext. 5159

Manager, Public Relations

christopher.sharkey@ambest.com

or

William Pargeans, +1 908-439-2200, ext. 5359

Assistant Vice President

william.pargeans@ambest.com

or

Jim Peavy, +1 908-439-2200, ext. 5644

Assistant Vice President, Public Relations

james.peavy@ambest.com

Source: A.M. Best