A.M. Best Affirms Financial Strength and Debt Ratings of USAA; Assigns Issuer Credit Ratings

OLDWICK, N.J.--Dec. 2, 20050, 2005--A.M. Best Co. has affirmed the financial strength rating (FSR) of A++ (Superior) of United Services Automobile Association (USAA Group) (San Antonio, TX) and its subsidiaries. Concurrently, A.M. Best has affirmed the debt ratings of "aaa" on the medium-term note program and AMB-1+ on the commercial paper program of USAA Capital Corporation (San Antonio, TX). A.M. Best has also assigned issuer credit ratings (ICR) of "aaa" to the USAA Group, its property/casualty subsidiaries and its life insurance companies. All ratings have a stable outlook.

USAA Group maintains superior capitalization through a high quality balance sheet, conservative operating philosophy, a well recognized franchise and distinct business profile. USAA Group benefits from significant competitive advantages as part of the USAA family of companies, which provides a full range of financial products and services to its membership consisting of military and ex-military personnel and their dependents. This clearly defined niche, excellent service capabilities and low-cost expense structure have resulted in a high degree of customer loyalty. Further, capitalization is enhanced from strong operational efficiencies achieved from its direct business model as well as strong financial risk management at the enterprise level.

Modestly offsetting these positive factors is USAA Group's exposure to frequent and severe weather-related events, as evidenced by considerable hurricane losses in recent years. Although the group maintains a national spread of risk and strong reinsurance protection, approximately 40% of its premium volume is derived from four catastrophe prone states--Texas, California, Florida and Virginia. Despite the frequent and severe catastrophe losses in 2004 and 2005, the group continues to produce strong earnings and record solid surplus growth.

The rating of USAA Life Insurance Company (USAA Life) (Texas) and its subsidiary, USAA Life Insurance Company of New York (New York), is based on the company's highly focused and well-established presence in the military market, core role in the United Services Automobile Association, consistently strong earnings performance, high quality balance sheet, conservative financial management and superior capitalization levels on both an absolute and risk adjusted basis.

Partially offsetting these strengths are the challenges associated with managing future triple xxx capital funding needs on its term life business, increasing the mix of its permanent versus temporary product sales, maintaining growth and penetration of its core affiliated membership base, increased financial services competition and managing the interest rate and disintermediation risks inherent in its annuity portfolio.

The FSR of A++ (Superior) has been affirmed and ICRs of "aaa" have been assigned for United Services Automobile Association and its following subsidiaries:

-- USAA Casualty Insurance Company

-- USAA General Indemnity Company

-- USAA Limited

-- USAA Texas Lloyd's Company

-- USAA County Mutual Insurance Company

-- USAA Life Insurance Company

-- USAA Life Insurance Company of New York

The following debt ratings have been affirmed:

    USAA Capital Corporation--

            -- "aaa" on the medium term note program

            --  AMB-1+ on the commercial paper program

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A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.