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AM Best Revises Outlooks to Positive for ARAG Insurance Company

AM Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a+” (Excellent) of ARAG Insurance Company (ARAG) (Des Moines, IA).

These Credit Ratings (ratings) reflect ARAG’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The outlook revision to positive reflects ARAG’s long-term operating performance, which has outperformed similarly assessed peers, both in terms of its underwriting and total return metrics. ARAG’s favorable operating performance has proven to be sustainable, with its single line of business, personal legal insurance, historically producing minimal loss severity with loss reserve development patterns that are relatively short-tail. The severity of each loss is largely limited by the specific nature of the coverages and the pre-defined fee structure. Additionally, ARAG’s ability to quickly process claims through its fast-track claims payment system has afforded it significant discounts from the attorney network utilized for services rendered. These factors have enabled ARAG to outperform its peers consistently.

ARAG’s balance sheet strength is assessed as strongest based on its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), modest underwriting leverage, strong liquidity measures, conservative investment strategy, relatively predictable claims development patterns and low reinsurance dependence. These positive factors are partially offset by the substantial annual stockholder dividends paid to the parent company, ARAG North America, Inc., which have limited the company’s surplus growth in recent years.

The business profile is assessed as neutral as the company is a provider of personal legal insurance in the United States with a market-leading position offsetting its single line of business concentration. The company distributes its products primarily through employers as part of their employee benefits package, targeting those that have 250 or more employees in a wide variety of industries that have historically demonstrated strong participation levels in similar legal plans.

The company’s ERM program is considered appropriate for the size and scope of its operation, as it adheres to a conservative risk appetite and maintains an established corporate governance structure.

Positive rating action could occur in the near term if ARAG’s operating performance continues to trend favorably compared with similarly assessed peers, while maintaining stable premium growth and policyholder retention. Negative rating action could occur if risk-adjusted capitalization materially weakens, including as a result of outsized dividends.

This press release relates to Credit Ratings that have been published on AM 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 see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit

Copyright © 2024 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.


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