News Releases

OLDWICK, N.J.--(BUSINESS WIRE)--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) (Johnston, IA). Both ratings have been removed from under review with positive implications, and a stable outlook has been assigned to the FSR and a positive outlook to the ICR.

The rating actions follow the acquisition of Rain and Hail Insurance Service, Inc. (Rain and Hail), the parent company of AGIC, by ACE American Insurance Company, an indirect wholly owned subsidiary of ACE Limited(ACE) [NYSE: ACE]. ACE had already owned approximately 20% 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 1980s.

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% 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% (including trust preferreds). ACE’s interest coverage remained strong at year-end 2010 at 15.6 times.

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include “Rating Members of Insurance Groups”; “Understanding BCAR for Property/Casualty Insurers”; “A.M. Best’s Ratings and the Treatment of Debt”; “Equity Credit for Hybrid Securities”; and “Risk Management and the Rating Process.” Methodologies can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2011 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.