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Best’s News & Research Service - February 28, 2017 09:45 AM (EST)

A.M. Best Upgrades Credit Ratings of Oklahoma Farm Bureau Mutual Insurance Company and Its Subsidiary

  • February 28, 2017 09:45 AM (EST)
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Oldwick //BestWire// - A.M. Best has upgraded the Financial Strength Rating to B+ (Good) from B (Fair) and the Long-Term Issuer Credit Rating to “bbb-” from “bb+” for the members of the Oklahoma Farm Bureau Group: Oklahoma Farm Bureau Mutual Insurance Company and its wholly owned subsidiary, AgSecurity Insurance Company, collectively referred to as Oklahoma Farm Bureau. The outlook of these Credit Ratings (ratings) has been revised to stable from positive. All companies are domiciled in Oklahoma City, OK.

The rating upgrades reflect the Oklahoma Farm Bureau’s improved risk-adjusted capitalization through profitable underwriting and operating performance in recent years. The group’s quality and quantity of capital has improved significantly through organic surplus appreciation and repayment of surplus notes, which has aided its risk-adjusted capitalization measures. In addition, Oklahoma Farm Bureau’s underwriting leverage ratios have decreased and are more closely aligned with the private passenger standard auto and homeowners composite. The improved balance sheet strength and operating performance is reflective of management initiatives to reduce exposure and strengthen underwriting standards.

These positive factors are partially offset by Oklahoma Farm Bureau’s operating earnings volatility in earlier years due to frequency and severity of weather-related events, dependence on reinsurance and geographic concentration of risk. The frequency and severity of weather-related events resulted in significant operating losses in earlier years. In response, the group’s management undertook considerable risk management initiatives to improve underwriting and operating results. In addition, management strategically utilized reinsurance to aid in balance sheet relief until corrective actions could gain traction. These actions have materialized favorably and management is re-evaluating these contracts and has begun to reassume portions of that business. As the group increases net premiums written by eliminating quota-shares, there could be added stress to risk-adjusted capitalization and underwriting leverage ratios. Additionally, the group’s geographic concentration of risk as a single state writer in Oklahoma exposes it to frequent and severe weather-related events, as well as judicial, economic and legislative restrictions.

This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source.

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