OLDWICK, N.J.–(BUSINESS WIRE)–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
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
- 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
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use of Best’s Credit Ratings and A.M. Best press releases, please view Guide
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