Best Upgrades Agri General’s Ratings to ‘A+’

A.M. Best Co. has upgraded the financial strength rating (FSR) to ‘A+’ (Superior) from ‘A’ (Excellent) and issuer credit rating (ICR) to “aa-” from “a” of Agri General Insurance Company (AGIC) of Johnston, Iowa, and has removed the ratings from under review with positive implications.

The assigned outlook for the FSR is stable, and the outlook for the ICR is positive.

Best explained that the rating actions follow the acquisition of Rain and Hail Insurance Service, Inc., the parent company of AGIC, by ACE American Insurance Company, an indirect wholly owned subsidiary of ACE Limited, which had already owned approximately 20 percent of the outstanding common stock of Rain and Hail when the acquisition was first announced in September.

Rain and Hail has acted as ACE’s managing general agent under its standard reinsurance agreement with the federal government since the 1980’s. Best noted that “subsequent to the acquisition, AGIC will receive explicit support from its immediate parent, the lead member of the ACE American Pool, in the form of a 100 percent quota share agreement.

“As a member of the ACE American Pool’s rating unit, AGIC’s ratings reflect the benefits derived from being a core operation of ACE and having access to its substantial capital, with $23 billion of consolidated GAAP equity at December 31, 2010. AGIC also is integrated into ACE in terms of its strategy and through its long-term existing business relationship and prior partial ownership.

“ACE funded the acquisition largely through the issuance of $1.0 billion in reverse repurchase agreements (repos). Management anticipates that these repos will be settled no later than the third quarter of 2011. In the interim, ACE’s financial leverage did increase somewhat but remained strong through year-end 2010, with debt-to-tangible capital of 21.3 percent (including trust preferreds). ACE’s interest coverage remained strong at year-end 2010 at 15.6 times.”

Source: A.M. Best