Best’s News & Research Service - April 30, 2014 01:49 PM (EDT)
A.M. Best Revises Issuer Credit Ratings Outlook to Stable for North Carolina Farm Bureau Group's Members
Oldwick //BestWire// - A.M. Best has revised the outlook for the issuer credit ratings (ICR) to stable from negative and affirmed the financial strength rating (FSR) of A (Excellent) and the ICRs of "a+" for the North Carolina Farm Bureau Group (North Carolina Farm Bureau) members, North Carolina Farm Bureau Mutual Insurance Company and Farm Bureau Insurance Company of N.C., Inc. The outlook for the FSR is stable. All companies are domiciled in Raleigh, NC.
The rating affirmations reflect North Carolina Farm Bureau's solid risk-adjusted capitalization and historically favorable operating earnings. The ratings also recognize the group's strong risk management practices and market leadership position as an insurer of farm-related exposures in North Carolina. These positive rating factors are reflective of management's disciplined underwriting approach and conservative investment strategy.
North Carolina Farm Bureau's ongoing risk management initiatives are reflected in its ratings and are designed to reduce catastrophe exposure and drive more consistent underwriting performance. Furthermore, North Carolina Farm Bureau maintains a cost-effective agency network, a long-standing local market presence, as well as derives benefits from the sponsorship provided by the North Carolina Farm Bureau Federation, which facilitates marketing and government relations efforts as well as enhances customer loyalty and affinity.
Partially offsetting these positive rating factors are North Carolina Farm Bureau's geographic concentration of risk, which exposes it to weather-related events, as well as risks from changes in the economic, judicial and regulatory environments. The group's exposure to weather-related events was evident in 2011 when above-average claims caused by wind, hail, tornadoes and Hurricane Irene resulted in a significant underwriting loss and a surplus decline of over 20%. Prior to 2011, North Carolina Farm Bureau's underwriting performance had been better than the composite average.
The revision of the ICRs outlook to stable reflects North Carolina Farm Bureau's stronger surplus position and improved risk-adjusted capitalization and operating performance in 2012 and in 2013. While this is partly due to relatively milder weather patterns during this period, it also reflects North Carolina Farm Bureau's emphasis on reducing underwriting losses through enhanced pricing and better risk selection. The outlook further considers North Carolina Farm Bureau's efforts in recent years to mitigate its exposure to catastrophic weather related losses through a steady reduction in risk exposures in coastal and/or concentrated areas and through additional reinsurance protection.
Factors that could result in negative rating actions include a renewed deterioration in North Carolina Farm Bureau's operating performance and/or erosion of its capital base. Factors that could result in further improvement in the ratings and/or a positive outlook are continued sustained improvement in the group's underwriting and operating performance while maintaining strong risk-adjusted capitalization.
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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