ADM’s captive rating affirmed
The captive of Archer Daniels Midland Company (ADM) has had affirmed its financial strength rating of A- (excellent) and issuer credit rating of “a-”. The outlook for both ratings is stable, said AM Best.
A FSR of A- (excellent) and ICR of “a-” have also been assigned to Arizona-based ADM Insurance Company.
The ratings for Agrinational are based on its excellent capitalisation level, overall favourable operating performance and its strategic role as a captive of ADM, said AM Best.
But partially offsetting these favourable factors is the high net retention on Agrinational’s property exposures, which has produced some variability in operating results, said the ratings agency.
Agrinational also provides insurance for a limited amount of quasi third-party business 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. Management considers these investments as long term and a better alignment of the company’s capital structure while providing stability in cash flows and investment returns, said AM Best.
In 2010, Agrinational purchased 100% of Advanta Corporation’s stock, a dormant insurance shell. In 2011, the newly acquired company’s name was changed to ADM Insurance Company and it began writing multiple peril crop insurance and crop/hail named peril crop insurance.
As Agrinational’s wholly-owned subsidiary, ADMIC is rated with Agrinational due to its role and strategic importance to its ultimate parent, as demonstrated by the inter-company reinsurance arrangement between the affiliated members, said the ratings agency.