AM Best has upgraded the credit ratings for the members of Ally Insurance Group.

They include Motors Insurance Corporation and its reinsured subsidiaries, MIC Property and Casualty Insurance Corporation and CIM Insurance Corporation, all of which are domiciled in Detroit, as well as an affiliate, Bermudian-domiciled Ally International Insurance Company Ltd.

The Bermuda entity is a Class 3A insurer licensed and regulated by the Bermuda Monetary Authority.

The ratings agency upped Ally’s financial strength rating to A (Excellent) from A- (Excellent) and the long-term issuer credit ratings to “a” (Excellent) from “a-” (Excellent).

The outlook of these credit ratings is stable.

The ratings reflect Ally Insurance’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

The ratings also reflect the neutral impact from the ultimate parent, Ally Financial Inc, a bank holding company headquartered in Detroit.

While historically the ratings of the members of Ally Insurance reflected the drag by the lower ratings of the group’s ultimate parent, AM Best said it considers the financial condition of Ally Financial Inc to have a neutral impact on these ratings.

Despite the current economic and inflationary conditions impacting the auto, credit and banking industries, the ultimate parent’s operating performance, capital levels and conservative corporate culture have been a benefit to the overall organisation, the ratings agency said, and Ally Financial Inc’s lower credit ratings have not adversely impacted the financial performance of the members of Ally Insurance.

Ally Insurance’s balance sheet strength assessment is supported by its strongest level of risk-adjusted capitalisation, as measured by Best’s capital adequacy ratio, modest underwriting leverage (despite premium sessions to producer-owned reinsurance companies), prudent reserving and a conservative investment asset base.

The group’s history of large dividend payments to its ultimate parent, after exceeding capital targets, has led to fluctuating surplus growth.

However, the group’s quality of capital remains high as its earnings capacity remains solid through disciplined underwriting and a steady stream of investment income on its growing investment asset base, AM Best said.

The group’s operating performance remains adequate, but was negatively impacted in 2023 by weather-related losses in its auto physical damage line, as well as the continued impact of the macroeconomic challenges facing the auto industry, which have depressed premium writings for the group’s commercial products.

AM Best said Ally Insurance has a well-established presence as a specialised writer of vehicle service contracts and guaranteed asset protection products throughout the United States and Canada, and is also a leading provider of selected commercial insurance coverages, primarily auto physical damage for dealers’ vehicle inventory, throughout the United States.

The group has taken steps in recent years to expand into other lines of business and product services, and benefits from strategic alliances in non-auto markets.

Ally Insurance also benefits from its leading innovative processes aligned with its ultimate parent, AM Best said, as well as its appropriate risk management capabilities.