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A.M. Best Affirms Credit Ratings of United Services Automobile Association, Its Subsidiaries and USAA Capital Corporation
[February 24, 2017]

A.M. Best Affirms Credit Ratings of United Services Automobile Association, Its Subsidiaries and USAA Capital Corporation


A.M. Best has affirmed the Financial Strength Rating (FSR) of A++ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of "aaa" of United Services Automobile Association (USAA) and its property/casualty and life/health subsidiaries. Concurrently, A.M. Best has affirmed the Long-Term Issue Credit Rating (Long-Term IR) of "aaa" on the medium-term note program and the senior unsecured medium-term notes and the rating of AMB-1+ on the commercial paper program of USAA Capital Corporation. A.M. Best has also assigned a Long-Term IR of "aaa" to USAA Capital Corporation's newly issued $350 million senior unsecured floating rate bonds. The outlook for all Credit Ratings (ratings) is stable, with the exception of the commercial paper, which does not have an outlook. Both companies are domiciled in San Antonio, TX. (See below for a detailed listing of the companies and ratings.)

The rating affirmations reflect USAA's superior risk-adjusted capitalization and strong operating results through focused business and financial strategies. USAA maintains diversified sources of earnings and strong enterprise risk management (ERM) with a full range of financial products and services to its membership of military and ex-military personnel and their dependents. USAA's low cost structure, high customer retention, effective use of technology and exceptional customer service capabilities have enabled it to build a sustainable competitive advantage in the personal lines sector. As a result of these strengths, USAA has built a sizeable market position, especially in the property/casualty segment, as the nation's fifth-largest private passenger auto and fifth-largest homeowners' policy provider, based on A.M. Best 2015 industry direct premium data. In addition, USAA maintains a relatively conservative investment strategy, which has enabled it to experience favorable investment returns even during times of significant market turmoil and record low interest rates. As part of its ERM strategy, USAA has developed strong catastrophe management and a sound reinsurance program that has preserved the capital and financial security of its membership through years of significant catastrophe activity, and has also implemented a series of initiatives to address recent auto results.

Modestly offsetting these positive rating factors is USAA's exposure to frequent and severe weather-related events.This exposure was demonstrated in 2016 as USAA experienced its worst catastrophe loss year in its history for both losses and claim counts due to a series of hail storms in Texas and Colorado. In addition, an uptick in frequency and severity of automobile losses as a result of macroeconomic factors also pressured USAA's loss ratio in 2016.



The ratings of USAA Life Insurance Company and its subsidiary, USAA Life Insurance Company of New York, together referred to as USAA Life, are based on its superior stand-alone risk-adjusted capitalization, favorable operating results and a diversified product profile, while supporting its parent's strategy of facilitating the financial security of its members through a full range of financial products and services. The ratings also reflect the financial strength of USAA, as well as the considerable benefits associated with the depth of USAA's relationship with its military affinity group. USAA Life serves as the life insurance arm of USAA and benefits from parental resources, including advanced technology to support its life, annuity and health operations. Rating considerations also include strong liquidity coverage ratios, along with well-integrated ERM practices to monitor and mitigate stress events throughout the organization.

Partially offsetting rating factors include the challenges associated with balancing the company's earnings/reserves mix between ordinary life and annuities, maintaining targeted spreads on its annuity business in the prolonged low interest rate environment and the recent downward credit migration within its investment grade fixed income portfolio.


The FSR of A++ (Superior) and the Long-Term ICRs of "aaa" have been affirmed with a stable outlook for United Services Automobile Association and its following property/casualty and life/health subsidiaries:

  • USAA Casualty Insurance Company
  • USAA General Indemnity Company
  • USAA Limited
  • USAA County Mutual Insurance Company
  • USAA Life Insurance Company
  • USAA Life Insurance Company of New York

The following Long-Term IRs have been affirmed:

USAA Capital Corporation-

-- "aaa" on the medium-term note program
-- "aaa" on $350 million 2.125% senior unsecured bonds, due 2019
-- "aaa" on $400 million 2.450% senior unsecured bonds, due 2020
-- AMB-1+ on the commercial paper program

The following Long-Term IR has been assigned:

USAA Capital Corporation-

-- "aaa" on $350 million senior unsecured floating rate bonds, due 2019

This press release relates to Credit Ratings that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best's Credit Ratings.

A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.


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