AM Best has upgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “a+” from “a” and affirmed the Financial Strength Rating (FSR) of A (Excellent) of Federated Rural Electric Insurance Exchange (Federated Rural) in Lenexa, Kansas. The outlook for the rating is stable.
The ratings reflect Federated Rural’s balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
The Long-Term ICR of Federated Rural was upgraded based on the exchange’s business profile, which has exhibited defensible competitive advantages within the U.S. electric cooperative market. Federated Rural has an 87% market share of the rural electric cooperative market. Its dominant position is strengthened further by the exchange’s high customer retention ratio that indicates a strong relationship with its cooperative policyholder base.
In addition, Federated Rural writes in 45 states, thus mitigating the exchange’s geographic concentration of risk to major weather events. Furthermore, the exchange mitigates part of its product offering’s risk profile through a comprehensive loss control and safety practice program among its cooperative insureds. Lastly, the exchange’s dominant market position provides Federated Rural with access to cooperatives’ loss history, thus allowing it to price risk more soundly and accurately than other carriers.
The ratings also takes into consideration the group’s strongest risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), and the group’s strong operating metrics, which outperform the composite average, as well as enterprise risk management that the company manages very carefully for its internal risks and those of its policyholders.
Source: AM Best
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