OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has revised the outlook to negative from stable and affirmed the financial strength rating of B++ (Good) and the issuer credit rating of “bbb” of Colorado Farm Bureau Mutual Insurance Company (Colorado Farm Bureau) (Centennial, CO).
The affirmation of Colorado Farm Bureau’s ratings reflects its supportive risk-adjusted capitalization, which is somewhat offset by its unfavorable operating performance trend due primarily to weather-related losses in recent years as underwriting results were negatively impacted by significant wildfire and tornado/hail events. These events, coupled with the continued reduction in Colorado Farm Bureau’s surplus position, are the main drivers in revising the outlook to negative from stable. However, the company’s net underwriting leverage remains moderate, and its risk-adjusted capitalization is still supportive of its current rating level. However, were these negative operating and capitalization trends to continue in 2014, it may result in the ratings being downgraded.
Colorado Farm Bureau has been in the process of merging with three other farm bureau mutual entities since 2011: Farm Bureau Mutual Insurance Company of Arkansas, Inc., Louisiana Farm Bureau Mutual Insurance Company and South Carolina Farm Bureau Mutual Insurance Company.
While the mergers are expected to result in an entity with a significantly greater premium and capital base, along with a wider geographic spread, the ratings of Colorado Farm Bureau are due to its current circumstances. While the potential does exist for Colorado Farm Bureau’s ratings to be downgraded based on its financial performance as reflected by the negative outlook, its ratings are not expected to be significantly impacted by the completion of the merger process. Pending regulatory and policyholder approvals, the transaction is expected to be completed in 2015.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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