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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - OCTOBER 07, 2011 12:00 AM (EDT)
A.M. Best Co. has downgraded the financial strength rating to B- (Fair) from B (Fair) and issuer credit ratings to "bb-" from "bb" of Oklahoma Farm Bureau Group (Oklahoma Farm Bureau) and its members, Oklahoma Farm Bureau Mutual Insurance Company and AgSecurity Insurance Company (all domiciled in Oklahoma City, OK). The outlook for all ratings is negative.
The rating downgrades reflect Oklahoma Farm Bureau‘s declining surplus trend as a result of its poor underwriting performance, which has continued into 2011. Oklahoma Farm Bureau has experienced significant underwriting losses over the past five years, with a five-year average combined ratio that is significantly worse than its personal lines composite. Although the company has increased rates, reduced exposure and implemented loss control initiatives, frequent and severe catastrophe events have resulted in continued underwriting losses.
In addition, Oklahoma Farm Bureau bolstered its surplus through an approximate $25 million surplus note in 2010; however, severe storms early in the third quarter of 2010 and the second quarter of 2011 eroded much of this capital.
Oklahoma Farm Bureau continues to improve its risk management strategies. In addition, the company maintains a favorable expense structure and benefits from its affiliation with The Oklahoma Farm Bureau Federation.
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"; "Catastrophe Analysis in A.M. Best Ratings"; "Natural Catastrophe Stress Test Methodology"; "Catastrophe Risk Management Incorporated Within the Rating Analysis"; "Equity Credit for Hybrid Securities"; and "A.M. Best Ratings & the Treatment of Debt." Methodologies 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.