AM Best Assigns Credit Ratings to Life Alliance Reassurance Corporation; Affirms Credit Ratings of the Members of AAA Life Group

OLDWICK, N.J.--(BUSINESS WIRE)--
AM Best has assigned a Financial Strength Rating (FSR) of A (Excellent) and a Long-Term Issuer Credit Rating (Long-Term ICR) of “a” (Excellent) to Life Alliance Reassurance Corporation (LARC) (Honolulu, HI). The outlook assigned to these Credit Ratings (ratings) is stable. Concurrently, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICRs o7f “a” (Excellent) 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. All entities, including LARC, collectively are referred to as the AAA Life Group. The outlook of these 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 assesses 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 (auto club), based in Southern California.

LARC is considered part of the AAA Life Group rating unit based on its role and importance to the group’s strategy, shared day-to-day operations and financial support provided through a quota share reinsurance treaty and capital contribution.

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 continue to trend upward, mostly as a result of its direct mail with diversified product offerings. Over recent years, the group generated pre-tax statutory operating losses driven by continued pressure from new business strain, adverse mortality and low interest rates. However, as evidenced by the improved performance so far in 2022, 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 Regulation XXX and principle-based statutory reserve impacts on earnings, and an elevated number of below-investment-grade holdings compared with the industry average.

The FSR of A (Excellent) and the Long-Term ICRs of “a” (Excellent) 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
• Pacific Beacon Life Reassurance Inc.
• AAA Life Re, Ltd.

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 Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2022 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Michael Venezia
Senior Financial Analyst

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Christopher Sharkey
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Robert Raber
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Jeff Mango
Managing Director, Strategy Communications

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Source: AM Best