A.M. Best Downgrades Ratings of Auto Club Insurance Association and its Insurance Subsidiaries


a m best (select to view enlarged photo)

OLDWICK, NJ--January 31, 2013: A.M. Best Co. has downgraded the financial strength rating (FSR) to A- (Excellent) from A (Excellent) and the issuer credit ratings (ICR) to "a-" from "a" of Auto Club Insurance Association (ACIA) (headquartered in Dearborn, MI) and its insurance subsidiaries. The outlook for all ratings has been revised to stable from negative. (See below for a detailed listing of the companies.)

“Risk Management and the Rating Process for Insurance Companies”

The downgrading of the ratings is based on the deterioration in ACIA's underwriting results and operating earnings, which has led to a decline in policyholders' surplus in recent years. The deterioration in underwriting results was driven by unfavorable loss experience for private passenger auto liability and non-Michigan business, as well as an increased frequency and severity of homeowner weather losses. In addition, the group maintains above-average non-affiliated investment leverage, driven by its investment holdings in unaffiliated common stock and bank loans, which equate to approximately 30% of surplus, and its non-investment grade bond holdings, which equate to approximately 10% of surplus.

ACIA's ratings and outlook reflect its strong risk-adjusted capitalization and well-established position as a personal lines market leader in Michigan, as well as the benefits derived from offering insurance products to American Automobile Association (AAA) members. The group's strong risk-adjusted capitalization is driven by its moderate underwriting leverage, partially offset by its above average non-affiliated investment leverage and moderate gross and net catastrophe exposure. These positive attributes are derived from ACIA's AAA affiliation, through which it writes a controlled book of business with a select class of policyholders. Management remains focused on improving its competitive position in Michigan, and by acquiring Meemic Insurance Company in 2009 and Fremont Insurance Company in 2011, it has further diversified its distribution channels and targeted audience in Michigan.

ACIA has recently implemented numerous strategic initiatives to improve underwriting performance, which included private passenger auto and homeowner rate adjustments in states where they were indicated; increased pricing sophistication and product enhancements to improve profitability and competitive position; refinements to underwriting guidelines and modifications to its reinsurance program.

Additional negative rating actions could occur from continued deterioration in ACIA's operating performance and policyholders' surplus, resulting in a material decline in risk-adjusted capitalization.

The FSR has been downgraded to A- (Excellent) from A (Excellent) and ICRs to "a-" from "a" for Auto Club Insurance Association and its following insurance subsidiaries:

  • MemberSelect Insurance Company
  • Auto Club Group Insurance Company
  • Meemic Insurance Company
  • Fremont Insurance Company
  • Auto Club Property/Casualty Insurance Company

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: "Rating Members of Insurance Groups"; "Risk Management and the Rating Process for Insurance Companies"; "Catastrophe Analysis in A.M. Best Ratings"; and "Understanding BCAR for Property/Casualty Insurers." Best's Credit Rating Methodology can be found at Methodology.

Home | Buyers Guides By Make | New Car Buyers Guide | Used Car Super Search | Total New Car Costs | New Car and Truck Reviews
Automotive News | TACH-TV | Media Library | Discount Auto Parts

Copyright © 1996-2014 The Auto Channel. Contact Information, Credits, and Terms of Use. These following titles and media identification are Trademarks owned by The Auto Channel, LLC and have been in continuous use since 1987 : The Auto Channel, Auto Channel and TACH all have been in continuous use world wide since 1987, in Print, TV, Radio, Home Video, Newsletters, On-line, and other interactive media; all rights are reserved and infringement will be acted upon with force.

Privacy Statement | Size Does Matter | Media Kit | XML SITE MAP | Affiliates

Send your questions, comments, and suggestions to Editor-in-Chief@theautochannel.com.

Submit Company releases or Product News stories to submit@theautochannel.com.
Place copy in body of email, NO attachments please.

To report errors and other problems with this page, please use this form.

Link to this page: http://www.theautochannel.com/