AM Best: Outlooks Revised to Stable for Texas Farm Bureau Insurance Companies

December 14, 2018

AM Best has revised the outlooks to stable from negative and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a” of Texas Farm Bureau Casualty Insurance Co. and Farm Bureau County Mutual Insurance Co. of Texas. These two companies comprise the Texas Farm Bureau Casualty Group.

Concurrently, AM Best also has affirmed the FSR of A- (Excellent) and the Long-Term ICRs of “a-” of Texas Farm Bureau Mutual Insurance Co. and Texas Farm Bureau Underwriters – A Reciprocal. The outlook of these Credit Ratings (ratings) remains stable. These companies are affiliates of the group, and collectively referred to as Texas Farm Bureau Mutual Group. All companies are domiciled in Waco, Texas.

The ratings of the Texas Farm Bureau Casualty Group reflect its balance sheet strength, which AM Best categorizes as strongest, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

The ratings of Texas Farm Bureau Mutual Group reflects its balance sheet strength, which AM Best categorizes as strong, as well as its marginal operating performance, limited business profile and appropriate ERM.

The revised outlook for the Long-Term ICR of the group reflects its improved underwriting results in recent years, which when combined with income from the investment portfolio, has produced positive pre- and post-tax earnings and year-over-year growth in policyholder surplus. Management has implemented strict underwriting and pricing guidelines across its auto book, which over the past five years has been affected by increased bodily injury losses and the higher cost of vehicle repairs.

Weather also has played a factor in recent years, specifically Hurricane Harvey, which produced record floods and resulted in higher auto physical damage claims. Over time, AM Best expects operating volatility to diminish as underwriting initiatives continue to materialize.

The balance sheet strength of the group is supported by the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), at the 99.6 VaR confidence level, sound liquidity and comprehensive reinsurance protection that provides ample tail-risk protection. The balance sheet is further supported by acceptable levels of leverage and a history of strong policyholder surplus growth. These factors are offset partially by the Group’s limited financial flexibility.

The group’s business profile is limited based on its product line and geographic concentration with auto business written entirely in Texas. AM Best considers the ERM framework appropriate given the group’s size and scope in the Texas auto market. Risk management capabilities are commensurate, formalized and aligned with the operational needs of group.

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