Market Overview

A.M. Best Upgrades Credit Ratings of the Members of AAA Life Group

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A.M. Best has upgraded the Financial Strength Rating (FSR) to A
(Excellent) from A- (Excellent) and the Long-Term Issuer Credit Ratings
(Long-Term ICR) to "a" from "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). The outlook of these Credit
Ratings (ratings) has been revised to stable from positive. See below
for a detailed listing of affiliated reinsurers.

The ratings reflect AAA Life Group's balance sheet strength, which A.M.
Best categorizes 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 of Southern California.

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 strongest risk-adjusted
capitalization. The group's 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 and
other initiatives along with diversified product offerings, AAA Life's
direct written premiums have trended upward in recent years.

The group has generated positive pre-tax statutory operating earnings in
recent years, with the exception of 2017, primarily due to new business
strain. In addition, A.M. Best expects statutory earnings to trend
positive over the near to medium term.

AAA Life writes all new insurance business and reinsures the business 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, 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.

AAA Life Group receives rating enhancement, due to its strategic
importance to the auto club owners as evidenced by recent and 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 impact of Regulation XXX reserving
on statutory earnings, and an elevated amount of below-investment-grade
holdings compared with the industry average.

The FSR has been upgraded to A (Excellent) from A- (Excellent) and the
Long-Term ICRs to "a" from "a-" 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
  • 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
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 a global rating agency and information provider with a
unique focus on the insurance industry. Visit
www.ambest.com
for more information
.

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

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