AM Best Downgrades Credit Ratings of Farm Bureau Mutual Insurance Company of Arkansas, Inc.; Revises Under Review Status to Developing

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has downgraded the Financial Strength Rating to B (Fair) from B+ (Good) and the Long-Term Issuer Credit Rating to “bb” (Fair) from “bbb-” (Good) of Farm Bureau Mutual Insurance Company of Arkansas, Inc. (FBMICA) (Little Rock, AR). Concurrently, AM Best has maintained the under review status for these Credit Ratings (ratings) and revised the implication status to developing from negative.

The ratings reflect FBMICA’s balance sheet strength, which AM Best assesses as adequate, as well as its marginal operating performance, limited business profile and marginal enterprise risk management.

The rating downgrades reflect that through year-to-date 2024, FBMICA’s policyholder’s surplus has continued to erode, which in turn has prompted continued deterioration in the company’s overall level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), as well as other key balance sheet strength metrics. The adverse trends are a result of continued losses due to severe weather-related events, in the form of hail and windstorms, as well as tornado activity. FBMICA’s results remain vulnerable to catastrophe losses as a single-state writer in Arkansas, and in May 2024, there was another significant tornado event incurred, which will impact the company’s prospective performance further. As a result, the balance sheet assessment was lowered to adequate from strong.

The under review status has been maintained as FBMICA continues to refine its capital management strategy, yet the implication status was revised in light of the rating downgrades. AM Best expects that once executed, these initiatives will stimulate improvement in the overall level of risk-adjusted capitalization, as well as other key balance sheet strength metrics. FBMICA continues to implement significant rate increases and underwriting revisions in the meantime in response to the volatility. The ratings will remain under review until the company executes its capital improvement strategies and AM Best can properly evaluate FBMICA’s rating fundamentals operationally and financially. If the company does not implement these plans as anticipated, nor do the strategic actions facilitate material improvement in key balance sheet strength metrics, the ratings likely will 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.

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