A.M. Best Affirms Credit Ratings of United Services Automobile Association, Its Subsidiaries and USAA Capital Corporation

OLDWICK, N.J.--()--A.M. Best has affirmed the Financial Strength Rating (FSR) of A++ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aaa” of United Services Automobile Association (USAA) and its property/casualty (P/C) and life/health (L/H) subsidiaries. Concurrently, A.M. Best has affirmed the Long-Term ICR and the Long-Term Issue Credit Rating (Long-Term IR) of “aaa” on the medium-term note program and the senior unsecured medium-term notes, and the Short-Term Issue Credit Rating (Short-Term IR) of AMB-1+ on the commercial paper program of USAA Capital Corporation. The outlook of these Credit Ratings (ratings) is stable, with the exception of the commercial paper, which does not have an outlook. All companies are domiciled in San Antonio, TX. (See below for a detailed listing of the companies and ratings.)

The ratings reflect USAA’s balance sheet strength, which A.M. Best categorizes as strongest, as well as its very strong operating performance, very favorable business profile and very strong enterprise risk management (ERM).

USAA maintains diversified sources of earnings and strong ERM, with a full range of financial products and services to its membership of military and ex-military personnel and their dependents. 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. As a result of these strengths, USAA has built a sizeable market position, especially in the P/C segment, as the nation’s fifth-largest private passenger auto and fourth-largest homeowners’ policy provider, based on A.M. Best 2017 industry direct premium data. In addition, USAA maintains a relatively conservative investment strategy, which has enabled it to experience favorable investment returns even during times of significant market turmoil and record low interest rates. As part of its ERM strategy, USAA has developed strong catastrophe management, and a sound reinsurance program that has preserved the capital and financial security of its membership through years of significant catastrophe activity, particularly over the past two years. USAA also implemented a series of initiatives to address recent negative trends in frequency and severity in the personal auto lines, which led to marked improvement in auto results in 2017.

Modestly offsetting these positive rating factors is USAA’s exposure to frequent and severe weather-related events. This exposure was demonstrated in 2016 and 2017, as USAA experienced its worst catastrophe loss years in its history, for both losses and claim counts. In 2016, results were impacted by a series of hailstorms in Texas and Colorado, and in 2017, results were impacted by Hurricanes Harvey and Irma, as well as significant wildfires in California. In addition, the previously noted negative trends in frequency and severity of automobile losses as a result of macroeconomic factors also have pressured USAA’s loss ratio in recent years.

The ratings of USAA Life Insurance Company and its subsidiary, USAA Life Insurance Company of New York, together referred to as USAA Life, reflect its balance sheet strength, which A.M. Best categorizes as strongest, as well as its strong operating performance, favorable business profile and very strong ERM. The ratings also reflect the financial strength of USAA and the considerable benefits associated with the depth of USAA’s relationship with its military affinity group. USAA Life serves as the life insurance arm of USAA and benefits from parental resources, including advanced technology to support its life, annuity and health operations.

Partially offsetting rating factors include the challenges associated with balancing the company’s earnings/reserves mix between ordinary life and annuities, maintaining targeted spreads on its annuity business in the prolonged low interest rate environment and growing its ordinary life sales, which have been below the average for the industry in recent years.

The FSR of A++ (Superior) and the Long-Term ICRs of “aaa” have been affirmed with a stable outlook for United Services Automobile Association and its following P/C and L/H subsidiaries:

  • USAA Casualty Insurance Company
  • USAA General Indemnity Company
  • USAA Limited
  • USAA County Mutual Insurance Company
  • USAA Life Insurance Company
  • USAA Life Insurance Company of New York

USAA Capital Corporation

The following Long-Term IR has been assigned with a stable outlook:

-- “aaa” on $400 million 2.000% senior unsecured medium-term notes, due 2021

The following indicative Long-Term IR under the universal shelf registration has been affirmed:

-- “aaa” on the senior unsecured medium-term note program

The following Long-Term IRs have been affirmed:

-- “aaa” on $350 million 2.125% senior unsecured medium-term notes, due 2019

-- “aaa” on $400 million 2.450% senior unsecured medium-term notes, due 2020

-- “aaa” on $350 million senior unsecured floating rate medium-term notes, due 2019

The following Short-Term IR has been affirmed:

-- AMB-1+ on the commercial paper program

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 Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Contacts

A.M. Best
Raymond Thomson, CPCU, ARe, ARM
Associate Director – P/C
+1 908 439 2200, ext. 5621
raymond.thomson@ambest.com
or
Anthony McSwieney
Senior Financial Analyst – L/H
+1 908 439 2200, ext. 5715
anthony.mcswieney@ambest.com
or
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com
or
Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

Contacts

A.M. Best
Raymond Thomson, CPCU, ARe, ARM
Associate Director – P/C
+1 908 439 2200, ext. 5621
raymond.thomson@ambest.com
or
Anthony McSwieney
Senior Financial Analyst – L/H
+1 908 439 2200, ext. 5715
anthony.mcswieney@ambest.com
or
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com
or
Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com