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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - FEBRUARY 08, 2013 12:00 AM (EST)
A.M. Best Co. has removed from under review with developing implications and affirmed the financial strength rating of B++ (Good) and issuer credit ratings of “bbb” of South Carolina Farm Bureau Mutual Insurance Company and Palmetto Casualty Insurance Company (together known as South Carolina Farm Bureau) (both domiciled in Cayce-West Columbia, SC). The outlook assigned to all ratings is negative.
While the affirmation of the ratings of South Carolina Farm Bureau reflects its adequate risk-adjusted capitalization, the assigned outlook is negative primarily due to the organization’s ongoing unfavorable operating performance in recent years, especially since 2010, as surplus declines have become more significant during this period. This is due to frequent occurrences of weather events, which have produced significant underwriting losses that have negatively impacted South Carolina Farm Bureau’s capital position. Although the group’s risk-adjusted capitalization is still supportive of its current ratings, and management is taking additional steps to improve operating performance and capitalization, a continuation of adverse underwriting performance that further erodes its capital position could result in further rating downgrades.
Furthermore, South Carolina Farm Bureau has been in the process of merging with three other mutual entities since early 2011: Colorado Farm Bureau Mutual Insurance Company, Louisiana Farm Bureau Mutual Insurance Company and Farm Bureau Mutual Insurance Company of Arkansas, Inc.
While the merger is expected to result in an entity with a significantly greater premium and capital base, along with a wider geographic spread, the removal of the under review status of South Carolina Farm Bureau is due to its current circumstances. While the potential does exist for South Carolina’s ratings to be downgraded based on its own financial performance as reflected by the negative outlook, it is not expected to be significantly impacted by the completion of the merger process itself. Pending regulatory and policyholder approvals, the transaction is expected to be completed by year-end 2013.
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. Key criteria utilized include: “Understanding BCAR for Property/Casualty Insurers”; “Risk Management and the Rating Process for Insurance Companies”; “Catastrophe Analysis in A.M. Best Ratings”; and “Rating Members of Insurance Groups.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source.