AM Best Affirms Credit Ratings of the Members of AAA Life Group

Business Wire

OLDWICK, N.J.--(BUSINESS WIRE)-- AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a” for AAA Life Insurance Company (AAA Life) (Livonia, MI), AAA Life Insurance Company of New York (Harrison, NY) and the companies affiliated with AAA Life (with all entities 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.

The ratings reflect AAA Life Group’s balance sheet strength, which AM 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 (auto club).

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 risk-adjusted capitalization that is at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The group’s investment portfolio is of good credit quality, with holdings predominantly in bonds and minimal holdings in stocks, mortgages and BA assets.

AAA Life’s direct written premiums have trended upward in recent years, mostly as a result of its direct mail with diversified product offerings. The group has generated positive pre-tax statutory operating earnings in four of the past five years, despite new business strain. In addition, AM Best expects statutory earnings to trend positively over the near to medium term.

AAA Life underwrites all new insurance business and reinsures it 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, AM 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 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 of A (Excellent) and the Long-Term ICRs of “a” have been affirmed 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 AM 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 AM 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 AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.