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Credit ratings

Moody's Downgrades USAA's Insurance Financial Strength Rating

Strategic Insights

— 1 min read

Moody's Investors Service has issued a credit downgrade to United Services Automobile Association (USAA), affecting its insurance financial strength (IFS) rating, backed senior unsecured debt rating, and backed senior unsecured medium-term note program. The rating action follows a similar downgrade of the US Government's long-term issuer and senior unsecured ratings. The downgrades reflect linkages between USAA's credit profile and the US Government's, as well as prolonged and costly regulatory and compliance issues in USAA's banking business.

Key Takeaways:

  • Moody's has downgraded USAA's IFS rating to Aa1 from Aaa, with a stable outlook.
  • The downgrade reflects linkages between USAA's credit profile and the US Government's, as well as prolonged and costly regulatory and compliance issues in USAA's banking business.
  • USAA's group-wide investments are predominantly in the US, including securities issued by or guaranteed by the US Government.
  • The company's banking subsidiary, USAA Federal Savings Bank, is subject to a new consent order with its main regulator, the Office of the Comptroller of the Currency.
  • USAA has strong balance sheet and a net worth maintenance agreement from USAA, solid asset quality, and excellent liquidity.
  • However, the company has weak profitability and ongoing regulatory and compliance issues.
  • A rating upgrade is unlikely, but factors such as strong P&C underwriting performance, solid capitalization, and remediation of regulatory findings could signal stronger credit profiles.
  • Factors such as weaker P&C underwriting performance, weaker capitalization, and delays in regulatory remediation could lead to a rating downgrade for USAA and CapCo.

Statistics:

  • Revenue: $48.6 billion (2024)
  • Net income: $3.9 billion (2024)
  • Total assets: $220.6 billion (as of December 31, 2024)
  • USAA net worth: $32.1 billion (as of December 31, 2024)
  • NAIC risk-based capital ratio: 517% (at year-end 2024)
  • Gross underwriting leverage: 2.5x (as of December 31, 2024)
  • Consolidated financial leverage: 12.5% (as of December 31, 2024)

Sources:

  • Moody's Investors Service, rating press release, May 16, 2025
  • Moody's Investors Service, "Property and Casualty Insurers" methodology, April 2024
  • Moody's Investors Service, "Life Insurers" methodology, April 2024

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