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S&P Affirms Automobile Club Inter-Ins. 'BBBpi' Rtg

7 March 2000

S&P Affirms Automobile Club Inter-Ins. 'BBBpi' Rtg

    NEW YORK--March 3, 2000--Standard & Poor's today affirmed its triple-'Bpi' financial strength rating on Automobile Club Inter-Insurance Exchange.
    This reciprocal exchange, based in St Louis, Missouri and licensed in Arkansas, Illinois, Kansas, Mississippi, writes standard automobile insurance for members of the Automobile Club of Missouri Group and, on an agency basis, for AAA Kansas. The company, which distributes its products primarily by means of direct marketing, commenced operations in 1927. More than 85% of its business is in its major states of operation -- Missouri and Kansas.
    Automobile Club Inter-Insurance Exchange is anticipating license approval in Louisiana in the near future. It is a member of the Auto Club group of companies, a mid-sized insurance group with surplus in excess of $50 million in 1998.
    The rating is based on the company's interaffiliate pool with its subsidiary, Auto Club Family Insurance Co., in existence since Jan. 1, 1996, in which the company receives 80% of the pool and the subsidiary receives 20%.
    Major Rating Factors:

-- Capitalization was extremely strong at year-end 1998, as indicated by a Standard & Poor's capital adequacy ratio of 240.6%.
-- Operating performance has been good, with the time-weighted return on revenue from 1994 to 1998 at 7.2%. The loss ratio on private passenger auto liability business was 67.3% for 1998, an improvement of 5.8 percentage points from the prior year.
-- Net premiums written increased 7.2% in 1998 to $78.1 million while surplus increased 17.7% to $52.4 million. The $7.9 million gain in surplus comprised a $5.4 million gain in net income plus $2.4 million in net unrealized capital gains.
-- The company's geographic and product line concentration is high, making it susceptible, on a gross basis, to catastrophes and storm-related losses. In 1998, 77.3% of direct premiums written were in Missouri.

    '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.