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A.M. Best Affirms Ratings of The American Road Insurance Company CONTACTS:
FOR IMMEDIATE RELEASE OLDWICK, N.J., Jun. 17, 2009—A.M. Best Co. has affirmed the financial strength rating of B+ (Good) and issuer credit rating of “bbb-” of The American Road Insurance Company (TARIC) (Dearborn, MI). The outlook for both ratings is negative. TARIC’s capitalization and operating performance has been and continues to be robust. However, its ratings are the result of its immediate parent, Ford Motor Credit Company LLC (Ford Credit) and ultimate parent, Ford Motor Company’s (Ford) [NYSE: F] operating challenges, which act as a constraint on TARIC’s rating profile. The continuing solvency pressure on these entities has prompted the affirmation of the ratings. The ratings reflect TARIC’s excellent capitalization level, history of positive operating performance, conservative reserve practices and effective management of exposures. Over the past five years, the after-tax five-year return on surplus has averaged 15.9% and has consistently logged operation income in each year. Capital and surplus levels have declined -15.3% over the same period. The decline is primarily attributed to an extraordinary dividend of $100 million to its parent in 2008, reflective of TARIC’s established dividend policy, and unrealized capital losses. However, TARIC’s surplus growth levels have been through the accumulation of net profits, and the company continues to maintain an excellent level of capitalization. Partially offsetting these positive rating factors are A.M. Best’s concerns regarding the operations and profitability of Ford Credit and Ford and the potential impact of these entities on the operations of TARIC. An additional offsetting rating factor is the moderate amount of credit risk assumed by TARIC with placement of reinsurance to an offshore affiliate. Although TARIC’s ceded leverage is well above that of its peer companies, nearly all of its ceded reserves are backed by a trust account with TARIC named as the sole beneficiary., A.M. Best remains the leading rating agency of captive insurers rating a wide variety of more than 200 captives in the United States and throughout the world. For current Best’s Ratings and independent data on the captive and alternative insurance market, please visit www.ambest.com/captive. The principal methodologies used in determining these ratings, including any additional methodologies and factors, which may have been considered, can be found at www.ambest.com/ratings/methodology. Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com. ### |
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