OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A- (Excellent) and the issuer credit ratings of “a-” of AAA Life Insurance Company (AAA Life) (Livonia, MI) and its affiliated reinsurers (collectively referred to as the AAA Life Group). The outlook for all 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 reinsurance 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 the 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 to the industry average. While statutory results have included losses in recent years, the operating results have been consistently positive on a GAAP basis.
The FSR of A- (Excellent) and the 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 rating(s) 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 visit A.M. Best’s Ratings & Criteria Center.
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