AM Best has upgraded the Financial Strength Rating to A (Excellent) from A- (Excellent) and the Long-Term Issuer Credit Rating to “a” from “a-” of Louisiana Farm Bureau Mutual Insurance Co. (Louisiana Farm Bureau) in Baton Rouge, Louisiana.
The outlook of these Credit Ratings (ratings) has been revised to stable from positive.
The ratings reflect Louisiana Farm Bureau’s balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM).
The rating upgrades reflect a revision in AM Best’s assessment of the group’s operating performance to strong from adequate. This action is in response to favorable trends in the group’s underwriting performance over the past five years, which have outperformed the personal property composite.
The group’s strong performance can be attributed to significant exposure management that has focused on reducing business in tier 1 territories and addressing concentrated areas badly hit during Hurricanes Rita, Katrina and Gustav. In addition, the company has made significant rate adjustments and selectively grown new business in the northern territories of Louisiana.
Management also has improved the company’s catastrophe reinsurance program progressively by pre-purchasing reinsurance for second and third event coverage as well as increasing protection relative to its modeled probable maximum losses. These changes are significant to protect policyholder surplus, particularly for Louisiana Farm Bureau as a coastal writer that is highly susceptible to severe hurricanes.
The very strong level of balance sheet strength reflects the company’s moderate leverage, conservative investment profile and history of growing surplus year-over-year.
The limited business profile reflects the company’s geographic concentration of risk in a coastal state. As a single state writer in Louisiana, the company is exposed to severe hurricane events, as well as regulatory concerns. However, the company’s ERM is viewed as appropriate given its manageable risk profile and effective reinsurance dependence.
Source: A.M. Best
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