A.M. Best has revised the outlook to positive from stable and affirmed the financial strength rating of B++ (Good) and the issuer credit ratings of “bbb+” of Farm Bureau Mutual Insurance Co. of Michigan and Farm Bureau General Insurance Co. of Michigan, which are members of the Michigan Farm Bureau Group.
Both companies are domiciled in Lansing, Mich.
The positive outlook is based on the group’s improving trend of risk-adjusted capitalization, underwriting results and operating performance in recent years, generated by management’s actions to improve profitability and reduce risk.
The group’s positive rating attributes include strong risk-adjusted capitalization, favorable five-year operating performance relative to its peer group and sound business profile in Michigan.
Balance sheet strength is reflective of historically favorable loss reserve development, solid liquidity and supported by positive operating cash flows and a comprehensive catastrophe reinsurance program to minimize surplus loss.
The group is the leading provider of farmowners insurance in the state, and collectively, ranks sixth in homeowners insurance, seventh in private passenger auto insurance and seventh overall in the state, based upon direct premiums written.
This position was achieved through strong customer service-oriented business practices; the ability to cross sell its property/casualty insurance products with life insurance products from a sister company; product distribution through a captive agency force; and affiliation with Michigan Farm Bureau, which facilitates marketing and provides access to its members.
Additionally, management continues to take actions to improve earnings by tightening underwriting standards, increasing rates and pricing segmentation and continuing a home inspection program and incentive programs for agents.
These positive rating factors are partially offset by unfavorable operating results in the beginning of the previous five-year period. This was primarily the result of competitive pricing, a deteriorating risk profile and weather-related events.
Partially contributing to these results is the group’s single state concentration of risk in Michigan and low interest rate environment, which has suppressed investment income growth.
The group’s single state concentration exposes it to greater risk from severe localized storms, strong competitive pricing pressure, changes in the regulatory and legislative environments changes due to judicial rulings, as well as in economic conditions specific to Michigan.
Source: A.M. Best
Topics Trends Agribusiness Michigan
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