26 February 2018Analysis

The Kroger Co's Vermont captives rated 'Excellent'

AM Best has affirmed the Financial Strength Rating of A (Excellent) of Queen City Assurance and Vine Court Assurance, two single-parent captive insurance companies of the United States' second-largest retailer, The Kroger Co.

The outlook of these ratings is stable, and the ratings reflect the group's balance sheet strength, strong operating performance, limited business profile and appropriate enterprise risk management.

AM Best said the ratings are also based on the captives' excellent risk-adjusted capitalisation, substantial net income and underwriting profitability, a growing capital base, conservative investments and a strong adherence to the parent’s robust risk controls and overall risk culture. Return measures on a group and individual basis are consistently positive, reflective of the organisation’s prudent pricing and deployment of capital.

Partially offsetting these strengths are the captives' risk concentration, which is the result of being single-parent captives of Kroger, coupled with a substantial aggregate limit retained by the captives.

Key triggers that could result in a ratings upgrade include a consistently profitable operating performance coupled with a substantial increase in risk-adjusted capitalisation. Key rating triggers that could result in a downgrade include a precipitous decline in the companies’ risk-adjusted capital strength.