AM Best Downgrades Credit Ratings of Farm Bureau County Mutual Insurance Company of Texas and Texas Farm Bureau Casualty Insurance Company; Removes Affiliates From Under Review
April 24 2024 - 11:27AM
Business Wire
AM Best has downgraded the Financial Strength Rating
(FSR) to A- (Excellent) from A (Excellent) and the Long-Term Issuer
Credit Ratings (Long-Term ICR) to “a-” (Excellent) from “a”
(Excellent) of Farm Bureau County Mutual Insurance Company of Texas
and Texas Farm Bureau Casualty Insurance Company (together known as
Texas Farm Bureau Casualty Group). The outlook of these Credit
Ratings (ratings) is negative. At the same time, AM Best has
removed from under review with negative implications and affirmed
the FSR of A- (Excellent) and the Long-Term ICRs of “a-”
(Excellent) of Texas Farm Bureau Mutual Insurance Company and Texas
Farm Bureau Underwriters (together known as Texas Farm Bureau
Mutual Group). The outlook assigned to these ratings is negative.
All companies are domiciled in Waco, TX, and are collectively
referred to as Texas Farm Bureau Insurance Group (the group).
The ratings reflect Texas Farm Bureau Insurance Group’s balance
sheet strength, which AM Best assesses as very strong, as well as
its marginal operating performance, neutral business profile and
appropriate enterprise risk management.
Following a year of material surplus deterioration, the group
implemented a pooling agreement between its property affiliates
(Texas Farm Bureau Mutual Insurance Company) and the casualty
operations (Texas Farm Bureau Casualty Insurance Company),
consisting primarily of personal auto, effective Jan. 1, 2024,
which will allow the group to manage capital more effectively.
Under the pooling agreement, premiums, losses and expenses are
combined and pro-rated, with participation percentages based on the
individual members’ policyholder surplus.
The group’s balance sheet strength assessment of very strong
reflects of its very strong overall risk-adjusted capitalization,
as measured by Best’s Capital Adequacy Ratio (BCAR), as well as
moderate levels of leverage, adequate liquidity, favorable
calendar-year reserve development and a comprehensive reinsurance
program.
The group’s marginal operating performance assessment reflects
the most-recent three consecutive years of operating losses and a
high degree of volatility. As a result, most of the key
profitability metrics fall short of the private passenger standard
auto and homeowner composite. Like most of its peers, net
underwriting losses were driven by the extraordinary
weather-related events in 2023. These weather-related events
resulted in 13 catastrophe losses, as classified by the group, four
of which exceeded its occurrence catastrophe retention level.
Further driving elevated losses is the impact of increased loss
cost trends across the group’s core lines of business.
Texas Farm Bureau Insurance Group’s business profile is neutral,
supported by the group's market penetration as a leading personal
lines writer in Texas, along with their broad product offering. In
addition, the assessment takes into account the group’s
relationship with the Texas Farm Bureau, which enhances customer
loyalty and affinity.
In response to these adverse trends, management has put in place
a series of initiatives to return to profitability and improve
balance sheet strength metrics, including significant rate
increases, increased segmentation on the auto line of business and
more-refined underwriting guidelines. However, the negative
outlooks reflect the uncertainty and execution risks associated
with these efforts. Should key balance sheet or operating
performance metrics not stabilize as a result of these actions, the
ratings may be downgraded.
This press release relates to Credit Ratings that have been
published on AM 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 AM Best’s Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please
view Guide to Best's Credit Ratings. For information
on the proper use of Best’s Credit Ratings, Best’s Performance
Assessments, Best’s Preliminary Credit Assessments and AM Best
press releases, please view Guide to Proper Use of Best’s
Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and
data analytics provider specializing in the insurance industry.
Headquartered in the United States, the company does business in
over 100 countries with regional offices in London, Amsterdam,
Dubai, Hong Kong, Singapore and Mexico City. For more information,
visit www.ambest.com.
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Brinda Modi Shah Senior Financial Analyst +1
908 882 1767 brinda.shah@ambest.com
Christopher Sharkey Associate Director, Public
Relations +1 908 882 2310
christopher.sharkey@ambest.com
Richard Attanasio Senior Director +1 908 882
1638 richard.attanasio@ambest.com
Al Slavin Senior Public Relations Specialist +1
908 882 2318 al.slavin@ambest.com