A.M. Best has affirmed the financial strength rating of A-
(Excellent) and the issuer credit ratings of “a-” of Agrinational
Insurance Company (Agrinational) (Burlington, VT) and its wholly
owned subsidiary, ADM Insurance Company (ADMIC) (Phoenix, AZ).
The outlook for all ratings is stable.
The ratings of Agrinational are based on its adequate capitalization
level, overall favorable operating performance and its strategic role as
a captive insurer of Archer Daniels Midland Company (ADM)
(NYSE:ADM).
Partially offsetting these favorable rating factors is the high net
retention on Agrinational’s property exposures, which has produced some
variability in operating results. Also, as a single-parent captive,
Agrinational is exposed to concentration risk since its primary source
of business is from ADM. Additionally, Agrinational provides insurance
for a limited amount of quasi third-party businesses sourced through an
industry pooling arrangement.
As a means of diversifying its investment portfolio, Agrinational has
invested in the leasing of railcars and barges that are production
assets of ADM. Agrinational’s management considers these investments as
long term and a better alignment of Agrinational’s capital structure
while providing stability in cash flows and investment returns.
ADMIC’s ratings are based on its role and strategic importance to ADM,
as demonstrated by the inter-company reinsurance arrangement between the
affiliated members.
Key rating drivers that could lead to an upgrading of Agrinational’s
ratings are a stable underwriting performance, as well as reduced
overall net exposure over the next few years.
Factors that could lead to a negative outlook and/or a downgrading of
Agrinational’s ratings are material loss of capital from either claims
or investments, a reduced level of capital that does not support the
ratings, as measured by Best’s Capital Adequacy Ratio, or an increase in
net retention. The ratings are somewhat linked to ADM; therefore, any
unfavorable operating performance or material loss of capital could
result in changes to the captive’s ratings.
A.M. Best remains the leading rating agency of alternative risk transfer
entities, with more than 200 such vehicles rated in the United States
and throughout the world. For current Best’s Credit Ratings and
independent data on the captive and alternative risk transfer insurance
market, please visit www.ambest.com/captive.
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:
• Catastrophe Analysis in A.M. Best Ratings
• Rating Members of Insurance Groups
• Risk Management and the Rating Process for Insurance Companies
• Understanding BCAR for Property/Casualty Insurers
• Alternative Risk Transfer
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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