A.M. Best Affirms Ratings of Agrinational Insurance Company and ADM Insurance Company

A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and 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. 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 the company's ratings are material loss of capital from either claims or investments, a reduced level of capital that does not support the ratings 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: ambest.com/ratings/methodology.

A.M. Best Company is an insurance rating and information source.

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