OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has downgraded the Long-Term Issuer Credit Ratings (Long-Term ICRs) to “bbb” (Good) from “bbb+” (Good) and affirmed the Financial Strength Rating (FSR) of B++ (Good) of South Carolina Farm Bureau Mutual Insurance Company (Cayce, SC) and its reinsured affiliate, Palmetto Casualty Insurance Company (Cayce-West Columbia, SC). The outlook of the FSR has been revised to negative from stable while the outlook of the Long-Term ICR is negative. Both companies are collectively referred to as South Carolina Farm Bureau Group (SCFBG).
The Credit Ratings (ratings) reflect SCFBG’s balance sheet strength, which AM Best assesses as strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management.
The rating downgrades reflect ongoing volatility in SCFBG’s operating results, driven primarily by weather-related events and inflationary pressures. This has been a trend since 2022 and has continued through year-to-date 2024. Most recently, the group incurred significant losses associated with Hurricane Helene, which was a severe event primarily affecting the inland region of the state and will likely amount to one of the company’s largest events in its history. SCFBG is expected to retain its full $25 million catastrophe retention as a result of Hurricane Helene and it will have a substantial impact on year-end 2024 bottom line results. Thus, the group’s operating performance assessment has been lowered to marginal from adequate.
The negative outlooks consider the anticipated weakening in SCFBG’s key balance sheet strength metrics through the latter part of 2024. Policyholders’ surplus is expected to decline by a wide margin as a result of the persistent underwriting volatility, which in turn, will negatively affect the group’s overall level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). Underwriting and reserve leverage measures are also expected to rise, given the increases in both premium and reserve bases alongside policyholders’ surplus reductions. Should these metrics fall further than AM Best expects or weaken to a point that is no longer supportive of a strong balance sheet strength assessment, then the ratings are likely to be downgraded further.
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