AM Besthas affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of "a-" of Agrinational Insurance Company and its wholly owned subsidiary, ADM Insurance Company (collectively referred to as ADM Insurance Group). The outlook of these Credit Ratings (ratings) is stable. Both companies are headquartered in Burlington, VT.
The ratings reflect ADM Insurance Group's balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
The affirmation of the ratings reflects the strongest levels of risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio, and takes into account elevated leverage metrics that expose the group to volatility in times of stress. Agrinational Insurance Company sold its subsidiary, ADM Crop Risk Services, Inc., in 2017, which resulted in a significant reduction of Agrinational Insurance Company's premium volume. This has reshaped the profile of the company's insurance operations from that of captive with substantial third-party business to a captive primarily insuring risks of affiliated entities. ADM Insurance Group's exposures include high net retention on property exposures. Due to management's refocus on core business and exit from restrictive and non-core exposures, the operating performance of the insurance entities is expected to remain adequate due to rate increases recently implemented, as well as its low cost-expense structure and focus on ERM.
The ratings also reflect rating enhancement provided to ADM Insurance Group by the group's ultimate parent, Archer Daniels Midland Company [NYSE:ADM], one of the world's largest agricultural processors and food ingredient providers. The group holds a strategic position as the captive insurance companies for the ADM, serving a critical role in meeting certain global insurance requirements and providing risk management services to ADM and its subsidiaries. ADM in turn provides implicit and explicit support to ADM Insurance Group.
AM 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.
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