A.M. Best Co. has downgraded the financial strength rating to ‘A-’ (Excellent) from ‘A’ (Excellent) and issuer credit rating to “a-” from “a” of Milwaukee-based Badger Mutual Insurance Company (BIC, and has revised its outlook on both ratings to stable from negative. The rating downgrades reflect BIC’s” deteriorating operating performance trends over the past five years as a result of increased underwriting losses, which has led to the recent material decline in its policyholders’ surplus,” Best explained. “Additionally, BIC’s negative five-year returns on revenue and policyholders’ surplus unfavorably compares to its private passenger and homeowners’ composite. Several years of underwriting losses have resulted from frequent and severe wind/hail storms on concentrated property exposures and adverse loss reserve development, which primarily impacted the company’s homeowners’ and private passenger automobile liability lines of business.” Best also noted that BIC’s management “has already taken several corrective actions to improve underwriting profitability in the near term and mitigate exposure to weather-related losses in its primary states by increasing wind/hail storm deductibles, increasing rates and continuing to increase writings in its developing states.” Best said the although it “believes the company is well-positioned at its current rating level, negative rating actions may occur if it does not meet or exceed its projections and/or there is a deterioration in its risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio.”

A.M. Best Co. has downgraded the issuer credit ratings (ICR) to “bbb” from “bbb+” and affirmed the financial strength rating (FSR) of ‘B++’ (Good) of South Carolina Farm Bureau Mutual Insurance Company and Palmetto Casualty Insurance Company (together known as South Carolina Farm Bureau). The ratings remain under review, and the implications have been revised to developing from negative. Both companies are domiciled in Cayce-West Columbia, South Carolina. Best said that “while the affirmation of the FSR for South Carolina Farm Bureau reflects its risk-adjusted capitalization, which still remains supportive of the rating, the downgrading of the ICRs is primarily due to the organization’s unfavorable underwriting performance in recent years, especially in 2010 and 2011. This was due to repeated occurrences of severe weather events, which produced significant underwriting losses that negatively impacted South Carolina Farm Bureau’s capital position. The ratings could face additional negative pressure if there is a continuation of adverse underwriting performance.” Best also noted that South Carolina Farm Bureau “is currently in the process of merging with three other mutual entities: Colorado Farm Bureau Mutual Insurance Company, Louisiana Farm Bureau Mutual Insurance Company and Farm Bureau Mutual Insurance Company of Arkansas, Inc. While the merger is expected to result in an entity with a significantly greater premium and capital base, along with a wider geographic spread, the under review status of South Carolina Farm Bureau reflects a potential for changes in its risk-adjusted capitalization along with its business and risk profile.” Best said it plans to resolve the under review status upon the completion of the transaction. Pending regulatory and policyholder approvals, the transaction is expected to be completed by year-end 2012.

A.M. Best Co. has affirmed the financial strength rating of ‘B+’ (Good) and issuer credit rating of “bbb-” of Louisiana Farm Bureau Mutual Insurance Company, based in Baton Rouge, Louisiana. The ratings remain under review with positive implications. Louisiana Farm Bureau’s ratings reflect its “adequate risk-adjusted capitalization and favorable operating performance in recent years, as the company has benefited from milder weather patterns as well as improved underwriting earnings from re-underwriting initiatives,” said Best. Louisiana Farm Bureau also is currently in the process of merging with three other mutual entities: Farm Bureau Mutual Insurance Company of Arkansas, Inc., Colorado Farm Bureau Mutual Insurance Company and South Carolina Farm Bureau Mutual Insurance Company. Best explained that the “under review status for Louisiana Farm Bureau also reflects the potential that its ratings as a merged entity may be higher than its current ratings as the perceived benefit to the company from the merger is expected to result in an entity with greater financial flexibility, additional resources and a wider geographic spread. Best said it plans to resolve the under review status upon the completion of the transaction. Pending regulatory and policyholder approvals, the transaction is expected to be completed by year-end 2012.

A.M. Best Co. has affirmed the financial strength rating of ‘B++’ (Good) and issuer credit rating of “bbb+” of Colorado Farm Bureau Mutual Insurance Company, and that the “ratings remain under review, and the implications have been revised to negative from developing.” Colorado Farm Bureau’s ratings “reflect its favorable risk-adjusted capitalization, which is somewhat offset by its unfavorable operating performance trend due to weather-related losses in recent years,” Best explained. “If this negative trend were to continue in 2012, it may place additional pressure on the current ratings. Colorado Farm Bureau is currently in the process of merging with three other farm bureau mutual entities: Farm Bureau Mutual Insurance Company of Arkansas, Inc., Louisiana Farm Bureau Mutual Insurance Company and South Carolina Farm Bureau Mutual Insurance Company. While the merger is expected to result in an entity with a significantly greater premium and capital base, the under review status of Colorado Farm Bureau also reflects the potential that its ratings as a merged entity may be the same or lower than its current ratings.” Best said it plans to resolve the under review status upon the completion of the transaction. Pending regulatory and policyholder approvals, the transaction is expected to be completed by year-end 2012.

 

Article source: http://www.insurancejournal.com/news/national/2012/05/15/247571.htm

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