AUGUST 16, 2010 12:00 AM (EDT)
A.M. Best Removes from Under Review and Affirms Ratings of Oklahoma Farm Bureau Group and Its Members
Neil Das Gupta
(908) 439-2200, ext. 5206
(908) 439-2200, ext. 5665
(908) 439-2200, ext. 5378
(908) 439-2200, ext. 5644
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - AUGUST 16, 2010 12:00 AM (EDT)
A.M. Best Co. has removed from under review with negative implications and affirmed the financial strength rating of B (Fair) and issuer credit rating of "bb" of Oklahoma Farm Bureau Group and its members, Oklahoma Farm Bureau Mutual Insurance Company and AgSecurity Insurance Company (all located in Oklahoma City, OK). The outlook for all ratings remains negative.
The group's ratings were previously downgraded and subsequently placed under review following poor underwriting results in 2008 and 2009. (Please see press releases dated May 18 and August 21, 2009, and February 9, 2010). At the time of the last downgrade in February 2010, the ratings continued to remain under review, as the group was in the process of seeking additional capital to bolster its weakened capital position following net underwriting losses, which totaled nearly $72 million for the full year 2009. This was preceded by $64 million of net underwriting losses in full-year 2008, due primarily to frequent and severe weather-related events that mostly impacted its homeowners' book of business. Together, these events had led to a significant decline in policyholders' surplus since year-end 2007, which has resulted in significantly reduced risk-adjusted capitalization.
The latest rating action reflects Oklahoma Farm Bureau Group's recent successful acquisition of additional capital in the form of long-term surplus notes totaling nearly $25 million, as well as the purchase of additional reinsurance protection in an effort to stabilize its capital position.
While the above actions by the group have somewhat improved its current surplus levels and have resulted in a moderate reduction in its highly elevated underwriting leverage ratio, thereby somewhat improving its risk-adjusted capitalization measures, the rating outlook remains negative due to the group's ongoing negative underwriting performance, primarily from frequent weather-related losses, which continue to hinder its capital position.
The principal methodology used in determining these ratings is Best's Credit Rating Methodology - Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best's rating process and highlights the different rating criteria employed. Additional key criteria utilized include: "Risk Management and the Rating Process for Insurance Companies"; "Understanding BCAR for Property/Casualty Insurers"; "Rating Members of Insurance Groups"; "Natural Catastrophe Stress Test Methodology"; and "Equity Credit for Hybrid Securities." Methodologies 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.