A.M. Best Withdraws Ratings of Members of Balboa Insurance Group

A.M. Best has downgraded the financial strength rating to A- (Excellent) from A (Excellent) and the issuer credit rating to “a-” from “a” of the members of the Balboa Insurance Group (Balboa) (Irvine, CA). Balboa is wholly owned by Bank of America Corporation [NYSE: BAC] and consists of Balboa Insurance Company (Irvine, CA) and its wholly owned subsidiaries, Meritplan Insurance Company (Irvine, CA) and Newport Insurance Company (Phoenix, AZ). The outlook for both ratings was revised to stable from negative. Concurrently, A.M. Best has withdrawn the ratings in response to the company's request to no longer participate in A.M. Best's interactive rating process.

The rating downgrade reflects Balboa’s diminished business profile as a company in run-off. However, the ratings reflect the group's strong capitalization and reserve adequacy to support future claim payments to policyholders; organizational enterprise risk management under the oversight of Bank of America Corporation; and claims and policy administration provided by QBE Insurance Corporation (A/‘a’/Stable) under its reinsurance administrative services agreement through run-off. The group has been in run-off since the last of its lender-placed property policies were transferred onto QBE paper in May 2014. The majority of the insurance risks left on Balboa's books are the lender-placed guaranteed asset protection (GAP) auto policies that will remain in place for the length of the respective insured auto loans (average of 5 years). All remaining liabilities are reinsured by QBE. Balboa stopped writing GAP coverage in 2012, so the expectation is that this final portion of its book will be run-off by the end of 2019.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:

• Rating Members of Insurance Groups

• Risk Management and the Rating Process for Insurance Companies

• Evaluating Non-Insurance Ultimate Parents

• Understanding BCAR for Property/Casualty Insurers

• Rating Run-Off Insurers and Specialists

This press release relates to rating(s) 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 visit A.M. Best’s Ratings & Criteria Center.

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

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