A.M. Best Affirms Ratings of The American Road Insurance Company
August 17 2016 - 2:30PM
Business Wire
A.M. Best has affirmed the financial strength rating of A
(Excellent) and the issuer credit rating of “a” of The American
Road Insurance Company (TARIC) (Dearborn, MI). The outlook for
each rating is stable.
The ratings reflect TARIC’s excellent capitalization level,
history of positive operating performance, conservative reserving
practices and effective exposure management. Over the past five
years, the company’s after-tax five-year return on surplus has
averaged nearly 9%, primarily driven by profitable underwriting and
realized capital gains supplementing investment income. TARIC has
consistently logged operating income in each of the past five
years.
TARIC is a single parent or pure captive insurer wholly owned by
Ford Motor Credit Company, LLC (Ford Credit), which in turn is an
indirect wholly owned subsidiary of Ford Motor Company
(Ford) [NYSE:F]. The company provides a variety of coverages to
Ford and its subsidiaries in the United States and Canada,
primarily automobile floor plan collateral protection, inland
marine, extended service business and commercial auto liability.
TARIC’s extensive enterprise risk management program, which is
carried out at its ultimate parent, has proven effective at
mitigating weather-related losses, resulting in strong underwriting
performance over the most-recent five-year period.
Partially offsetting these positive rating factors is TARIC’s
narrow business focus and dependency on Ford’s business. In
addition, underwriting results in its automotive floor plan
business is subject to volatility due to events that may impact
vehicle inventories, such as severe weather. Furthermore, capital
and surplus levels have declined over the last five years,
primarily attributed to extraordinary dividends to its parent.
Notwithstanding, there is considerable flexibility in the dividend,
as evidenced in 2012 and 2013 when no dividend was paid. An
additional offsetting rating factor is TARIC’s dependence on
reinsurance to protect surplus. However, the credit risk associated
with this is mainly offset by collateral held in trust.
While the current ratings or outlooks are not expected to change
in the near term, significant deterioration in operating
performance may result in downward movement in the ratings or
outlooks. In addition, significant erosion in risk-adjusted
capitalization levels may result in negative rating action.
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.
This press release relates to rating(s) that have been
published on A.M. 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 A.M.
Best’s Recent Rating Activity web page.
A.M. Best is the world’s oldest and most authoritative
insurance rating and information source. For more information,
visit www.ambest.com.
Copyright © 2016 by A.M. Best Rating
Services, Inc. ALL RIGHTS RESERVED.
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version on businesswire.com: http://www.businesswire.com/news/home/20160817006087/en/
A.M. BestCharles M. HuberAssistant Vice
President+1 908 439 2200, ext.
5122charles.huber@ambest.comorDaniel J.
RyanVice President+1 908 439 2200, ext.
5325daniel.ryan@ambest.comorChristopher
SharkeyManager, Public Relations+1 908 439 2200, ext.
5159christopher.sharkey@ambest.comorJim
PeavyAssistant Vice President, Public Relations+1 908
439 2200, ext. 5644james.peavy@ambest.com
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