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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MAY 21, 2010 12:00 AM (EDT)
A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of "aa-" of Kentucky Farm Bureau Group (the Group) and its member, Kentucky Farm Bureau Mutual Insurance Company (Kentucky Mutual).
A.M. Best also has affirmed the FSR of A- (Excellent) and ICR of "a-" of Kentucky Mutual's wholly-owned but separately rated subsidiary, The FB Insurance Company (FB Insurance). The outlook for these ratings is stable. The companies are domiciled in Louisville, KY.
The ratings for the Group are based upon the consolidation of Kentucky Mutual and FB Insurance and are primarily reflective of the Group's superior risk-adjusted capitalization, highly liquid balance sheet and excellent business profile as one of the top personal lines carriers and leading provider of farmowners' insurance in Kentucky. These positive rating factors are partially offset by the Group's below average earnings and a geographic concentration of risk as a single state writer.
The Group benefits from its association with the Kentucky Farm Bureau Federation, which provides agricultural expertise and a stable, loyal customer base to whom it sells products in the personal and commercial lines. Its superior capital position has been attained by overall profitability and modest growth over an extended period of time.
The negative outlook recognizes that the Group's earnings have generally been below industry averages in all of its major lines of business, and recent severe weather-related losses have accentuated its limited geographic footprint. Management is taking steps to improve profitability and reduce risk by initiating changes in underwriting and increasing premium rates and claims deductibles; however, the ratings are under pressure pending sustained earnings improvement and reduction in underwriting volatility.
The ratings for FB Insurance are indicative of its superior capitalization partially offset by its run-off status. The company has been the non-standard automobile insurer for the Group; however, Kentucky Mutual has taken over underwriting most of FB Insurance's new and renewal business. Policyholders' liabilities are expected to be moved to Kentucky Mutual within the next year or two, and management is currently formulating long-term plans for the company.
For Best's Credit Ratings, an overview of the rating process and rating methodologies, please visit Best's Ratings & Analysis.
The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at Best's Credit Rating Methodology.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers.