AM Best Withdraws Credit Ratings of ADM Insurance Company; Affirms Credit Ratings of Agrinational Insurance Company

Rhea-AI Summary

AM Best has withdrawn the Financial Strength Rating (FSR) of A- and Long-Term Issuer Credit Rating of 'a-' for ADM Insurance Company, following its sale to a non-affiliated entity. Meanwhile, Agrinational Insurance Company retains its FSR and Long-Term ICR of A- and 'a-' with a stable outlook. The ratings indicate strong balance sheet strength and adequate operational performance, despite lower premium volumes since the sale of its subsidiary, ADM Crop Risk Services, in 2017. Agrinational primarily insures risks for affiliated entities and benefits from support from its parent company, Archer Daniels Midland.

Positive

• Agrinational Insurance Company maintains a stable outlook with affirmed ratings (FSR: A-, Long-Term ICR: 'a-').
• Strong balance sheet strength indicated by high risk-adjusted capitalization.
• Adequate operating performance expected due to implemented rate increases and low cost structure.

Negative

• Withdrawal of ratings for ADM Insurance Company may reflect negatively on market perception.
• Significant reduction in premium volume since the sale of ADM Crop Risk Services in 2017.

OLDWICK, N.J.--(BUSINESS WIRE)-- AM Best has withdrawn the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” (Excellent) of ADM Insurance Company (Phoenix, AZ). ADM Insurance Company was a member of ADM Insurance Group. AM Best has withdrawn these Credit Ratings (ratings) as the company has been sold to a non-affiliated company.

At the same time, AM Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” (Excellent) of Agrinational Insurance Company (Agrinational) (Burlington, VT), the group’s remaining member. The outlook of these ratings is stable.

The ratings reflect Agrinational’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.

The affirmation of the ratings reflects the strongest levels of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), and takes into account elevated leverage metrics that expose Agrinational to volatility in times of stress. Agrinational sold its subsidiary, ADM Crop Risk Services, Inc., in 2017, which resulted in a significant reduction of Agrinational’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. Agrinational’s exposures include high net retention on property exposures. Due to management’s refocus on core business and exits from restrictive and non-core exposures, the operating performance of Agrinational 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 by the company’s ultimate parent, Archer Daniels Midland Company (ADM) [NYSE:ADM], one of the world’s largest agricultural processors and food ingredient providers. Agrinational holds a strategic position as the captive insurance company for ADM, serving a critical role in meeting certain global insurance requirements and providing risk management services to the organization. ADM in turn provides implicit and explicit support to Agrinational.

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.

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 www.ambest.com.

Copyright © 2022 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220506005505/en/

Chul Hyung Lee

Senior Financial Analyst

+1 908 439 2200, ext. 5036

chul.lee@ambest.com

Christopher Sharkey

Manager, Public Relations

+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.com

Fred Eslami

Associate Director

+1 908 439 2200, ext. 5406

fred.eslami@ambest.com

Jeff Mango

Managing Director,

Strategy & Communications

+1 908 439 2200, ext. 5204

jeffrey.mango@ambest.com

Source: AM Best

FAQ

What happened to the ratings of ADM Insurance Company?

AM Best has withdrawn the Financial Strength Rating and Long-Term Issuer Credit Rating of ADM Insurance Company following its sale to a non-affiliated company.

What is the current rating of Agrinational Insurance Company?

Agrinational Insurance Company retains its Financial Strength Rating of A- and Long-Term Issuer Credit Rating of 'a-' with a stable outlook.

Why did Agrinational's premium volume decrease?

Agrinational's premium volume decreased significantly after it sold its subsidiary, ADM Crop Risk Services, in 2017.

How does ADM support Agrinational Insurance Company?

Archer Daniels Midland Company provides implicit and explicit support to Agrinational, enhancing its ratings.