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The 25 most financially sound auto insurers have at least one thing in common: A dedication to conservative underwriting and investment practices that have positioned them well in the economic downturn. Ratings recently completed its quarterly review of the financial strength of auto insurance companies, identifying 25 widely available companies worthy of an "excellent"

financial strength rating

of A+, A, or A-. The companies on the list are those that had total annual premium volume in 2007 (the most recent full-year data available) of $100 million or more, indicating that they offer coverage in several states. Ratings determines the financial strength of an insurance company through measuring a company's performance over time in many areas, including capitalization, profitability, reserve adequacy, liquidity and stability of operations. Insurers with the highest financial strength ratings are those with conservative underwriting practices that accurately price the risks they assume and set aside a sufficient amount of reserves to pay future claims while consistently earning profits to build capital.

High-rated companies may suffer problems during difficult economic times, but because of their historically sound practices, they have the capital built up to withstand tough times.

The top two insurers on our list,

United Services Automobile Association


USAA Casualty Insurance Co.

, are not household names, but reach a sizable amount of customers. While they only sell coverage to those in the military and their families, memberships are for life -- meaning the child of a current or former military person who joins can go on to cover spouses and children, and so forth. The club gets pretty big as evidenced by the $5.3 billion in premiums these two companies collected in 2007, plus the additional $193 million in premiums collected by

USAA General Indemnity

, further down on the list.

Third on the list,

Interinsurance Exchange of the Automobile Club

is actually more familiar than people might think. It underwrites the auto coverage for the American Automobile Association. The nationwide AAA often offers discounted coverage to its members, so it is definitely worth checking out the rates from this financially strong insurer.

The most familiar name on the list is Allstate Insurance Co., a unit of

Allstate Corp.

(ALL) - Get Report

, with an A- financial strength rating. Although


has taken its share of knocks during this financial crisis, the auto insurer is sound.

Most of the other companies on the list are regional insurers that may not offer coverage in all states, but there are definitely several choices for any individual state.

25 Largest Auto Insurers

Absent from the list of 25 strongest auto insurers are many household names. This doesn't mean those companies are not financially sound; they simply are not at the very top of our rankings for financial strength. The list of largest auto insurers includes those with annual premiums of $1 billion or more.

By far, the largest auto insurer in the nation is

State Farm Mutual Automobile Insurance Co.

with $27 billion in annual premium. It has a financial strength rating of B+ which puts it (and any other insurer rated B+ or higher) on the list of those companies recommended by for financial strength.

Three units of


( BRK-A) GEICO are among the largest. So are more Allstate units, three units of

Progressive Corp.

(PGR) - Get Report

and two



Melissa Gannon is director of insurance and bank ratings for Ratings, formerly Weiss Ratings, where she directs the operations of the company's insurance and bank ratings division.

In keeping with TSC's Investment Policy, employees of Ratings with access to pre-publication ratings data must pre-clear any potential trade through the legal department, and are prohibited from trading any security that is the subject of an unpublished rating revision until the second business day after the rating is published.

While Gannon cannot provide investment advice or recommendations, she appreciates your feedback;

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