OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has downgraded the Financial Strength Rating (FSR) to B++ (Good) from A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) to “bbb+” (Good) from “a-” (Excellent) of Florida Farm Bureau Casualty Insurance Company and its fully reinsured subsidiary, Florida Farm Bureau General Insurance Company, collectively referred to as Florida Farm Bureau Group. The outlook of the FSR has been revised to stable from negative while the outlook of the Long-Term ICR is negative. Both companies are domiciled in Gainesville, FL.
The Credit Ratings (ratings) reflect Florida Farm Bureau Group’s balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM). Additionally, the ratings reflect enhancement given the implicit and explicit support provided by its parent, Southern Farm Bureau Casualty Insurance Company.
These rating actions follow the group’s results through year-end 2021, which reflect a 28% surplus decline from the prior year and a cumulative decline of 35% over the most recent five-year period. Additionally, the group’s reserve adequacy has been trending unfavorably across all major lines of business. Deterioration continues to be driven by underwriting losses stemming from storms, hurricane activity and ongoing pressure in the auto line of business. Additionally, operations remain influenced by the unsettled Florida operating environment. The group has implemented numerous mitigation efforts including reserve strengthening, rate increases, non-renewal of undesirable risks, halting new business in certain lines of coverage and management of the assignment of benefits issue. However, the ultimate effectiveness of these initiatives remains to be seen.
The stable outlook on the FSR reflects the group’s strongest level of risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio (BCAR) and AM Best’s expectation that the very strong balance sheet strength assessment will be maintained in the near-term. The negative outlook on the Long-Term ICR reflects continued deterioration in operating performance due to the level of underwriting loss and corresponding surplus declines. The Long-Term ICR outlook also reflects pressure on the group’s ERM assessment as results have yet to improve substantially despite corrective actions. The expectation is that in the near-term, operating results will begin to show some improvement and reflect the effectiveness of risk management practices in-line with the group’s risk-profile.
Florida Farm Bureau Group’s business profile assessment reflects its limited operating territory within a single hurricane-prone state. Severe weather continues to be the group’s primary risk, and much of its ERM program has been centered on efforts to mitigate this exposure through a comprehensive catastrophe reinsurance program.
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