AM Best Revises Outlooks to Negative for Indiana Farmers Mutual Insurance Company; Assigns Credit Ratings to Indiana Farmers Indemnity Insurance Company

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a” (Excellent) of Indiana Farmers Mutual Insurance Company. Concurrently, AM Best has assigned an FSR of A (Excellent) and a Long-Term ICR of “a” (Excellent) to Indiana Farmers Indemnity Insurance Company (Indemnity). The outlook assigned these Credit Ratings (ratings) is negative. Indemnity is a newly formed subsidiary of Indiana Farmers Mutual Insurance Company. These companies are collectively referred to as Indiana Farmers Insurance Group (Indiana Farmers) and are domiciled in Indianapolis, IN.

The ratings reflect Indiana Farmers’ 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 revised outlooks to negative from stable for Indiana Farmers Mutual Insurance Company reflects the continuing volatility in Indiana Farmers’ operating performance leading to deteriorating results leading to consecutive years of surplus declines. Results have been influenced primarily by escalation in losses driven by more frequent and severe weather events coupled with inflationary pressures. In 2023, Indiana Farmers incurred four of its top ten largest catastrophe events. As a result, Indiana Farmers has reported mounting underwriting losses and thus net losses in two of the most recent years with the trend continuing into the current year. Ultimately, the deterioration in more recent years has skewed the group’s five-year average operating return measures to turn negative and lag the private passenger standard auto and homeowners composite. Management has implemented significant initiatives inclusive of rate increases to offset higher loss costs, and ongoing underwriting actions to drive more refined risk selection and improved weather resilience. In the absence of improvement from underwriting initiatives and rate changes, the ratings are likely to be downgraded.

Despite a substantial year of surplus decline in 2023, following a more moderate decline in 2022, Indiana Farmers’ balance sheet continues to be supported by its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), a comprehensive reinsurance program, and conservative investment portfolio. The business profile assessment reflects an improving spread of geographic risk away from the home state of Indiana and continued diversification in lines of business offered. Indiana Farmers’ ERM practices remain appropriate and in line with its risk profile, with a focus on catastrophe management, rate adequacy and reunderwriting and strategic non-renewals of underperforming business.

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