Best’s News & Research Service - May 20, 2008 01:52 PM (EDT)
A.M. Best Downgrades Ratings of American Farmers & Ranchers Mutual Insurance Company; Places Ratings Under Review
OLDWICK, N.J. //BestWire// - A.M. Best Co. has downgraded the financial strength rating (FSR) to B+ (Good) from B++ (Good) and issuer credit rating (ICR) to ‘bbb-” from ‘bbb” of American Farmers & Ranchers Mutual Insurance Company (Oklahoma City, OK). In addition, A.M. Best has assigned an FSR of B+ (Good) and ICRs of ‘bbb-” to American Farmers & Ranchers Group (Oklahoma City, OK) and American Farmers & Ranchers Insurance Company (formerly General Fire and Casualty Insurance Company) (Boise, ID) the recently acquired and fully reinsured subsidiary of American Farmers & Ranchers Mutual Insurance Company. All ratings have been placed under review with negative implications due to the uncertainty regarding the group’s future capital position and the challenges management will face integrating new business into the current operating structure.
These rating actions reflect the group’s weakened capital position from prior years as a result of costs associated with internal system improvements and the subsequent increase in the group’s non-admitted assets, as well as severe storm activity that occurred in late 2007 and early 2008 in its operating territory.
Partially offsetting these negative rating factors are the group’s adequate level of risk-adjusted capital, generally conservative operating practices and established agency relationships in Oklahoma, where the majority of the group’s property business is generated. The group’s risk-adjusted capitalization is supported by a conservative investment portfolio and a comprehensive reinsurance program that mitigates the potential losses from the group’s significant catastrophe exposures.
The group will remain under review pending further discussions with management, filing of its second quarter 2008 statement and when premium and capital expectations are compiled for the new group.
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