AM Best has upgraded the Financial Strength Rating to A- (Excellent) from B++ (Good) and the Long-Term Issuer Credit Rating to “a-” from “bbb+” of Auto Club Insurance Company of Florida (ACICF), headquartered in Tampa, Fla., and AAA’s Florida-based insurer. The outlook of these Credit Ratings remains stable.
According to a statement from Best, the ratings reflect ACICF’s balance sheet strength, which AM Best categorizes as strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM).
The rating upgrades reflect the company’s improving balance sheet strength on a catastrophe stress-tested basis as demonstrated by solid surplus growth in most of the past five years, Best said. Following a modest loss of surplus in 2017, driven primarily by Hurricane Irma losses, ACICF’s surplus rebounded in 2018. The company’s balance sheet remains strong with sound liquidity measures, favorable underwriting leverage ratios and historically redundant reserve development. The ratings also recognize the implicit commitment provided by its ultimate parent, Auto Club Insurance Association (Dearborn, Mich.), for which ACICF receives rating enhancement.
Best noted that ACICF’s operating performance is strong as reflected by its five-year average pre-tax and total returns on revenue and equity that compare favorably with the composite. In addition, the company’s five-year average combined and operating ratios outperform the composite. As a single state writer in Florida, the company is exposed to hurricane events, as well as judicial, economic and regulatory concerns. As a result, its business profile is deemed limited.
However, the company adheres to a formalized comprehensive ERM program that identifies major risks to the organization while correlating mitigation strategies to offset these risks, Best said. In addition, the company maintains adequate reinsurance coverage to insulate policyholder surplus from significant weather events.
ACICF provides protection to over 64,000 families in Florida, bundling home, auto, and umbrella coverage into one policy. AAA members can also receive additional savings on select auto coverages, based on the tenure of their membership.
In a statement on the announcement, Thomas J. White, Florida Executive Vice President, AAA – The Auto Club Group, said the credit rating upgrade provides reassurance to Floridians after three major hurricanes hit the state in the past three years. It noted that more than 8,000 households filed hurricane-related claims with ACICF from the three storms.
“Floridians can take comfort in knowing we are a financially strong and viable organization that has the ability to pay claims, despite the risks presented by the Florida market,” White said. “This updated credit rating should reassure Floridians that we will be there, through the good times and bad.”
The Auto Club Group (ACG) is the second largest AAA club in North America. ACG and its affiliates provide membership, insurance, financial services and travel offerings to over 9.8 million members across eleven states and two U.S. territories including Florida, Georgia, Iowa, Michigan, Nebraska, North Dakota, Tennessee, Wisconsin, Puerto Rico and the U.S. Virgin Islands; most of Illinois and Minnesota; and a portion of Indiana.
Source: AM Best, The Auto Club Group
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