AM Best Downgrades Issuer Credit Ratings of Members of Farm Bureau Property & Casualty Group

OLDWICK, N.J.--(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.

Copyright © 2024 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.