Insurance ratings standard-bearer A.M. Best Co. has downgraded the financial strength rating to “A-” (excellent) from “A” (excellent) of Ford Motor Co. subsidiary the American Road Insurance Co., based in Dearborn, Mich. The rating outlook has been revised to negative from stable.
A.M. Best said in a statement that it is concerned with the operations and profitability of Ford and its potential impact on the operations of American Road.
In addition, the rating reflects a moderate amount of credit risk assumed by vehicle insurer American Road with placement of reinsurance to an offshore affiliate. Although American Road’s ceded leverage is well above that of its peers, nearly all of its ceded reserves are backed by an onshore trust account with American Road named as the sole beneficiary.
The rating recognizes American Road’s excellent capitalization level, history of positive operating performance, conservative reserve practices and effective management of exposures. Over the past five years, return on surplus has averaged 19.3 percent, while capital and surplus levels have grown at a compound rate of 47 percent through the accumulation of net profits, which is reflective of management’s focused operating strategy, disciplined underwriting, efficient operating structure and a steady stream of investment income.
Through the affiliation with Ford, American Road benefits from the extensive penetration of the Ford dealerships, brand name recognition of its immediate parent, Ford Credit, its widespread marketing network and direct sales support.
Topics AM Best
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