AM Best Downgrades Issuer Credit Ratings of Agraria Insurance Company and Its Affiliate

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has downgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “a” (Excellent) from “a+” (Excellent) and affirmed the Financial Strength Rating (FSR) of A (Excellent) of Agraria Insurance Company (AIC) (Jamestown, ND) and Farmers Union Mutual Insurance Company (Bryant, AR). The outlooks of the Long-Term ICRs have been revised to stable from negative, while the outlooks of the FSRs are stable. These companies are collectively referred to as Agraria.

The Credit Ratings (ratings) reflect Agaria’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 (ERM).

The Long-Term ICR downgrades reflect volatility in Agraria’s underwriting performance that deviates from historical profitability, with recent results aligning closer to adequate expectations. This volatility has been primarily influenced by elevated catastrophe activity, inflationary pressures and severe fire losses. Despite profitable results overall, Agraria’s key operating performance metrics are no longer supportive of the strong assessment level. Management has implemented several corrective measures including pricing actions, adherence to underwriting guidelines related to risk selection and weather mitigation strategies to reduce volatility. Additionally, management continues to deploy significant resources in technology and innovation initiatives, which are expected to position the organization for improved operational efficiency and long-term profitability.

The stable outlooks reflect AM Best’s expectation that recent corrective actions will gain traction in the near term, ultimately leading to stabilized underwriting results and an improved quality in Agraria’s overall risk profile. Despite a moderate surplus decline in 2022, risk-adjusted capitalization, remains at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). However, certain key balance sheet metrics including underwriting leverage and liquidity modestly trail AM Best’s personal property composite. Agraria’s business profile remains neutral, supported by its well-established market position in North Dakota, which benefits from its exclusive agency agreement with Farmers Union Service Association, Ltd., an organization that contracts with hundreds of agents in local communities across its operating territory. Agraria’s ERM remains appropriate, inclusive of a formalized program with qualitative and quantitative risk appetite and tolerance statements, as well as a comprehensive reinsurance program that partially insulates the balance sheet against shock losses.

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.

Copyright © 2023 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.