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S&P Affirms Auto Club Insurance Assn 'Api' Rtg

18 October 1999

S&P Affirms Auto Club Insurance Assn 'Api' Rtg

    NEW YORK, Oct. 15 -- Standard & Poor's affirmed its single-'Api' 
financial strength rating on Auto Club Insurance Association
(ACIA).
    ACIA, combined with its subsidiaries Auto Club Group Insurance Co. (ACGIC)
and Castle Insurance Co., form the Auto Club of Michigan Insurance Group.  The
Group is a member of the American Auto Association (AAA), a leading automotive
and travel service provider.  The company is organized as a reciprocal
exchange and provides auto insurance for members of the Auto Club of Michigan,
AAA Wisconsin Inc., and other affiliated organizations.  Headquartered in
Dearborn, MI, ACIA is licensed in Michigan and Wisconsin and commenced
operations in 1922.
    As the lead company in an interafflilated pooling agreement, ACIA assumes
all premiums, losses and expenses, and cedes 5% of the business to ACGIC and
another 5% to Castle Insurance.  In addition, a common management agreement is
in place between the companies.

    Major Rating Factors:
    -- Geographic concentration for the interaffiliated pool is high, with 99%
       of direct business written in Michigan. Geographic concentration can
       expose a company to regulatory and competitive risk.
    -- Reserve development has displayed more volatility than for higher rated
       companies.
    -- Liquidity for the interaffiliated pool is good, at 114%, as measured
       by Standard and Poor's liquidity model.
    -- Operating performance for the interaffiliated pool is strong, with the
       average return on revenue from 1993 to 1998 at 8%.
    -- Capitalization for the interaffiliated pool is extremely strong in
       excess of 300%, as measured by Standard and Poor's capital adequacy
       model.

    'Pi' ratings, denoted with a 'pi' subscript, are insurer financial
strength ratings based on an analysis of an insurer's published financial
information and additional information in the public domain.  They do not
reflect in-depth meetings with an insurer's management and are therefore based
on less comprehensive information than ratings without a 'pi' subscript.  'Pi'
ratings are reviewed annually based on a new year's financial statements, but
may be reviewed on an interim basis if a major event that may affect the
insurer's financial security occurs.  Ratings with a pi subscript are not
subject to potential CreditWatch listings.
    Ratings with a 'pi' subscript generally are not modified with 'plus' or
'minus' designations.  However, such designations may be assigned when the
insurer's financial strength rating is constrained by sovereign risk or the
credit quality of a parent company or affiliated group, Standard & Poor's
said. -- CreditWire