AM Best has affirmed the financial strength rating of ‘A’ (Excellent) and the long-term issuer credit ratings of ‘a+’ (Excellent) for both of The Kroger Company’s captives — Vermont domiciled Queen City Assurance and Vine Court Assurance — collectively referred to as Queen City Assurance Group, in addition to affording them a ‘stable’ outlook. The agency states its ratings are reflective of the group’s ‘strongest’ level of balance sheet strength, in conjunction with its strong operating performance, neutral business profile, and appropriate enterprise risk management. Moreover, Best’s capital adequacy ratio assesses the group’s risk-adjusted capitalisation as being at the ‘strongest’ level, with the ratings factoring in the high degree of financial flexibility afforded to the group through its publicly traded parent, and one of the food retail industry’s largest companies, Kroger. The agency cites the strong operating performance as reflective of the group’s favourable 5 and 10-year average combined and operating ratios, and its excellent return on revenue metrics. However, the group’s return on equity measures are lower relative to the broader industry, although Best says this is consistent with its shrewd underwriting leverage and purpose as a group of single-parent captives, in which the maximising of profit is not the priority. Despite uncharacteristically high levels of property losses causing a weakening of 2024’s underwriting results, overall earnings, underpinned by solid investment income, remained positive, with management indicating that the level of loss activity is not indicative of a continuing trend. The aforementioned ‘stable’ outlooks align with Best’s expectations that the captives’ operating performances will remain ‘stable and strong,’ with its earnings profile continuing to support the group’s growth and business writing consistent with their capital and surplus positions. Furthermore, the agency expects Kroger’s ability and willingness to support its captives to remain unchanged.
