A.M. Best Affirms Ratings of USAA and Its Subsidiaries
OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has affirmed the financial strength ratings (FSR) of A++ (Superior) and ICRs of “aaa” of United Services Automobile Association (USAA) (San Antonio, TX) and its property/casualty and life/health subsidiaries. Concurrently, A.M. Best has affirmed the debt rating of “aaa” on the medium-term note program and the AMB-1+ on the commercial paper program of USAA Capital Corporation (San Antonio, TX). The outlook for all ratings is stable. (See below for a detailed listing of the companies and ratings.)
The affirmations reflect USAA’s superior capitalization and strong operating results through focused business and financial strategies. USAA’s low cost structure, high customer retention, effective use of technology and exceptional customer service capabilities have enabled it to build a sustainable competitive advantage in the personal lines sector. In addition, USAA benefits from significant competitive advantages as part of the USAA family, which provides a full range of financial products and services to its membership of military and ex-military personnel and their dependents. USAA maintains diversified sources of earnings, capital accumulation and strong enterprise risk management. As a result of these strengths, USAA has built a sizeable market position with greater than $119 billion in assets under management.
Modestly offsetting these positive rating factors is USAA’s exposure to frequent and severe weather-related events, with approximately 40% of its premium volume derived from catastrophe-prone states. This exposure was evident in 2008, as catastrophe activity including several hurricanes resulted in considerable losses. However, despite the frequent and severe catastrophe losses in recent years, USAA continues to produce strong earnings and record solid surplus growth. Furthermore, as part of their enterprise risk management, USAA has strong catastrophe management and a sound reinsurance program designed to preserve the capital and financial security of its membership. In addition, USAA maintains a conservative investment strategy, which has enabled them to avoid material capital losses during the recent market turmoil.
USAA’s capitalization, operating strength, customer base and available resources at the group level strongly support the life insurance operations. The rating of USAA Life Insurance Company and its subsidiary, USAA Life Insurance Company of New York, together referred to as USAA Life, is based on the company's highly focused and well-established presence in the military market, core role in USAA, consistently strong earnings performance, conservative financial management, strong liquidity resources, strong enterprise risk management practices and very strong capitalization levels on both an absolute and risk-adjusted basis. Partially offsetting these strengths are the challenges associated with increasing the mix of its ordinary life business versus accumulation product sales, maintaining growth and penetration of its core affiliated membership base. In addition, given the uncertainty to the current economic and investment climate, USAA Life may be further challenged to achieve spreads on its annuity business at historical levels.
The FSRs of A++ (Superior) and ICRs of “aaa” have been affirmed for United Services Automobile Association and its following property/casualty and life/health subsidiaries:
The FSR of A++ (Superior) and ICR of “aaa” have been withdrawn for USAA Direct Life Insurance Company and assigned a Category NR-3 to FSR and an “nr” to the ICR.
The following debt ratings have been affirmed:
USAA Capital Corporation—
--“aaa” on the medium-term note program
--AMB-1+ on the commercial paper program
For Best’s Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.