AM Best Downgrades Issuer Credit Ratings of Members of Farm Bureau Property & Casualty Group
August 27 2024 - 10:55AM
Business Wire
AM Best has downgraded the Long-Term Issuer Credit
Ratings (Long-Term ICRs) to “a” (Excellent) from “a+” (Excellent)
and affirmed the Financial Strength Rating of A (Excellent) of Farm
Bureau Property & Casualty Insurance Company and Western
Agriculture Insurance Company, collectively known as Farm Bureau
Property & Casualty Group or the group. The outlook of these
Credit Ratings (ratings) has been revised to negative from
stable.
The ratings reflect the group’s balance sheet strength, which AM
Best assesses as very strong, as well as its adequate operating
performance, neutral business profile and appropriate enterprise
risk management.
The downgrades of the Long-Term ICRs reflect material erosion in
the group’s policyholders’ surplus and overall levels of
risk-adjusted capitalization, as measured by Best’s Capital
Adequacy Ratio (BCAR), through June 30, 2024. Surplus declined for
two consecutive years and has fallen by over 30% through the second
quarter of 2024, driven predominately by large underwriting losses
resulting from catastrophe events, namely a large hailstorm in May
and a wildfire event in June. Key balance sheet strength metrics
have weakened as a result and have fallen out of line with the
strongest assessment, leading to a downward revision in the balance
sheet strength assessment to very strong from strongest.
The revised outlooks to negative from stable contemplate the
sheer magnitude of the volatility exhibited in operating results
over recent years and continued through year-to-date, as well as
ongoing pressure on the group’s balance sheet strength. Since 2022,
due predominately to severe weather-related events but also
influenced by adverse reserve development in recent years, the
group has recorded combined ratios well above break-even and
sizable operating losses. If these operating performance trends
continue, the group could fall out of alignment with other adequate
assessed companies. Management is addressing the unfavorable trends
through pricing adjustments, increasing minimum deductibles, and
refining its underwriting strategies, though the overall efficacy
of these actions remains unknown. With further deterioration in
operating results, and/or continued weakening of policyholders’
surplus and key balance sheet strength metrics, the ratings are
likely to be downgraded further.
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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Lauren Magro Financial Analyst +1 908 882 2082
lauren.magro@ambest.com
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joseph.burtone@ambest.com
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908 882 2310 christopher.sharkey@ambest.com
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2318 al.slavin@ambest.com