AM Best downgrades Texas Farm Bureau Casualty Insurance Co.’s credit rating.

AM Best lowered its financial strength rating (FSR) to B++ (good) from A- (excellent) and its long-term issuer credit rating (long-term ICR) to ‘bbb+’ (good) from ‘a- ” (excellent). ) of Texas Farm Bureau Casualty Insurance Company and its affiliates, Farm Bureau County Mutual Insurance Company of Texas, Texas Farm Bureau Mutual Insurance Company and Texas Farm Bureau Underwriters.

The RSF outlook has been revised to stable from negative, while the long-term ICR outlook is negative. All companies are domiciled in Waco, Texas and are collectively known as the Texas Farm Bureau Insurance Group (the Group).

The credit ratings (ratings) reflect Texas Farm Bureau Insurance Group’s balance sheet strength, which AM Best rates as strong, as well as marginal operating performance, neutral business profile and adequate enterprise risk management.

AM Best said the downgrades reflect a deterioration in Texas Farm Bureau Insurance Group’s key balance sheet through June 2024, which was hit by a 21.5% reduction in policyholder surplus, which led to lower capitalization levels risk-adjusted as measured by Best’s. Capital adequacy ratio (BCAR).

The erosion of policyholder surplus was driven by underwriting losses resulting from the higher frequency of severe weather events in Texas, particularly in May, as well as the group’s increased reinsurance retention for 2024.

The group’s business profile is neutral, AM Best said, supported by its market penetration as the leading personal lines writer in Texas, along with its broad product offering. In addition, the rating takes into account the group’s relationship with the Texas Farm Bureau, which increases customer loyalty and affinity. The marginal rating of the group’s operating performance reflects the volatility of its underwriting results over the past few years, which adds pressure to the neutral rating of its business profile.

In response to these adverse trends, management has implemented a number of initiatives to return the group to profitability and improve balance sheet strength metrics, including significant rate increases, additional focus on exposure management, increased price segmentation on the line of automotive business and more refined underwriting guidelines.

In addition, management is reviewing a potential quota reinsurance agreement that is expected to somewhat improve risk-adjusted capitalization and underwriting leverage. The weather pattern in Texas has historically been more severe in the first half of the year, with the group reporting improved underwriting results in the second half. AM Best also considered the execution risks and uncertainty related to the time lag associated with these initiatives.

The negative outlook on the group’s long-term ICR reflects pressure on its business profile given the trends seen in performance, continued operational volatility and corresponding declines in risk-adjusted capitalisation, as well as key balance sheet strength metrics.

Source: AM Best

TOPICS
Texas Agribusiness AM Best Accident