Fitch Assigns Debt Ratings To USAA

    NEW YORK--Sept. 17, 2001--Fitch has assigned a `AA+' long-term issuer rating and medium-term note rating and an `F1+' short-term issuer rating and commercial paper rating to USAA Capital Corp., a downstream holding company for USAA's non-insurance operations. Fitch also affirmed the `AAA' insurer financial strength rating of the United Services Automobile Association (USAA). The Rating Outlook for all ratings is Stable.
    The ratings reflect USAA's very good capitalization and low operating leverage, a low cost structure and conservative reserving philosophy. Fitch believes USAA possesses a competitive advantage because of its low cost structure.
    At the same time, the ratings consider the negative effect of intense price competition in auto insurance rates on profits. Additionally, in order to maintain growth, USAA expanded its base of eligible policyholders and this new book of business is still maturing. USAA continues to monitor this group's risk characteristics and is taking steps to ensure that product pricing is commensurate with these risk characteristics. Further, USAA's operations have resulted in a concentration of homeowners' policies in states that expose it to greater risk of catastrophe. USAA monitors this risk closely and mitigates it with a sophisticated catastrophe management and reinsurance strategy.
    USAA's results are also affected by policyholder dividends that are higher than the industry average. USAA is organized as a reciprocal insurance exchange. As such, it has members, not shareholders. Fitch believes USAA will continue to return premiums to members in the form of policyholder dividends when such action does not conflict with the maintenance of its high capital strength levels.
    USAA offers its customers a full line of financial services through various subsidiaries. The subsidiaries include a life insurance company that sells annuities, life insurance and health insurance; a federal savings bank that offers checking and savings accounts, loans, certificates of deposit, individual retirement accounts and credit cards; an investment company that offers mutual funds, and owns a registered broker-dealer and a mutual fund transfer agent; and a real estate company.
    USAA reported statutory assets for its combined property/casualty insurance operations of $12.3 billion and surplus of $6.6 billion as of June 30, 2001. Net written premium from its property/casualty insurance operations was $2.9 billion through the first half of 2001.

Entity/Issue/Type              Action       Rating/Outlook

United Services Automobile Association
--Insurer financial strength  Unchanged      'AAA'/Stable.

USAA Capital Corporation
--Long-term issuer rating      Assigned      `AA+'/Stable;
--Medium-term note program     Assigned      `AA+'/Stable;
--Short-term issuer rating     Assigned      `F1+';
--Commercial paper rating      Assigned      `F1+'.

    NOTE: The noted ratings were initiated by Fitch as a service to users of Fitch ratings. The ratings are based primarily on public information.