Best’s News & Research Service - August 04, 2020 12:31 PM (EDT)
AM Best Revises Outlooks to Negative for Farm Mutual Reinsurance Plan Inc.
- August 04, 2020 12:31 PM (EDT)
Oldwick //BestWire// - AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Farm Mutual Reinsurance Plan Inc. (Farm Mutual Re) (Ontario, Canada).
These Credit Ratings (ratings) reflect Farm Mutual Re’s balance sheet strength, which AM Best categorizes as strongest, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
The negative outlooks reflect the deterioration of Farm Mutual Re’s underwriting performance resulting in underwriting losses beginning in 2018 and continuing through mid-year 2020. These losses are primarily the result of increased member property per risk and member auto claims in its core direct distribution segment, although performance in its broker segment, particularly in the United States, also has eroded due to weather-related claims. Operating results have been mostly offset by investment performance, which has limited the impact on members’ equity. However, equity was negatively impacted by unrealized investment losses in early 2020 due to the COVID-19 pandemic, although valuations have rebounded through the second quarter.
AM Best notes that the company has implemented a detailed strategy to improve performance, including implementing rate increases, adjusting its pricing model and enhancing claims processing. AM Best will monitor the company’s ability to execute on its strategy going forward as its ultimate effectiveness remains uncertain at this time.
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 Guide to 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 credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.