Based on AMEX Assurance Co.’s strong capital position and upward earnings trend, A.M. Best Company affirmed the financial strength rating and issuer credit rating of the company on Aug 10.
AMEX is a wholly owned subsidiary of American Express Co. (AXP). The company recently started retaining premiums from American Express Cardmembers, and as a result it is performing well with respect to earnings.
The ratings affirmed by the rating agency were A (Excellent) and “a” for financial strength and issuer credit, respectively.
A conservative investment risk profile and solid profit margins helped the company achieve a strong capital position. After it was reacquired by American Express on Sept 30, 2007, the company returned to stability with favorable underwriting and investment results. However, we are concerned about its significant dependence on American Express Cardmembers for revenue.
Despite continued weakness in Cardmembers spending and historically high levels of loan losses, American Express generated strong earnings, strengthened capital base and further expanded deposit gathering initiatives.
The results benefited from successful re-engineering efforts and from a diverse business model that combine the roles of card issuer, network and merchant processor. A healthy position of American Express Cardmembers will definitely benefit AMEX.
Read the full analyst report on “AXP”
Zacks Investment Research