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Best’s News & Research Service - February 05, 2019 08:58 AM (EST)

AM Best Upgrades Credit Ratings of Oklahoma Farm Bureau Mutual Insurance Company and Its Subsidiary

  • February 05, 2019 08:58 AM (EST)
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Oldwick //BestWire// - AM Best has upgraded the Financial Strength Rating to B++ (Good) from B+ (Good) and the Long-Term Issuer Credit Ratings to “bbb” from “bbb-” 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) is stable. All companies are domiciled in Oklahoma City, OK.

The ratings reflect Oklahoma Farm Bureau’s balance sheet strength, which AM Best categorizes as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

The rating upgrades reflect the sustained improvement in the group’s operating performance, evidence by its five-year average combined ratio, operating ratio and total return on equity, which compare favorably with the composite averages. The improved results stem from underwriting initiatives implemented in earlier years, which include increased rates, mandatory wind/hail deductibles, and comprehensive reinsurance programs that insulate policyholder surplus from frequency of events and shock losses. Management’s aggressive actions in overall risk management and exposure have resulted in consistent and stable operating results, which is the main driver to the rating upgrades.

The positive trends in operating performance are offset somewhat by the historical volatility in the group’s balance sheet and operating performance. Material losses in earlier years eroded capital, which was replaced subsequently by high interest surplus note obligations. As a result, the group’s investment returns have been hindered by interest payments on the notes. Likewise, the group’s quality of capital was stressed, as the surplus notes comprised a large percentage of total surplus. In recent years, the group has been able to reduce the surplus notes to less material percentage of surplus. However, the repayments were slowed somewhat by elevated underwriting expenses, due to ongoing internal system enhancements.

This press release relates to Credit Ratings that have been published on AM 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 AM 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. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry.

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