The FINANCIAL — OLDWICK — 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, according to A.M. Best Company, Inc.
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).
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, according to A.M. Best Company, Inc.
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, according to A.M. Best Company, Inc.
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.
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