AM Best downgraded the Financial Strength Rating to B++ (Good) from A- (Excellent) and the Long-Term Issuer Credit Rating to “bbb+” (Good) from “a-” (Excellent) of Farm Bureau Mutual Insurance Company of Arkansas Inc.
The outlook of the FSR was revised to stable from negative, while the outlook of the Long-Term ICR is negative.
The ratings reflect FBMICA’s balance sheet strength, which AM Best assessed as very strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management.
AM Best said the rating downgrades reflect ongoing volatility in FBMICA’s operating performance, driven by heavy underwriting losses emanating from wind, hail and tornado activity in Arkansas. This was coupled with increasing severity of loss costs due to inflation.
After two “tough weather” years in 2020 and 2021, the company incurred its single largest catastrophe event in its history in April, 2022.
“As a result, FBMICA has posted underwriting losses in a majority of the last five years and continues to show an upward trend in its combined ratio, ultimately positioning the company within the marginal assessment category,” an AM Best release stated. “Though the overall effectiveness of these actions remains to be seen, FBMICA continues to actively address its unfavorable performance through rate and deductible increases, ITV programs, exposure management techniques, property inspections and non-renewing historically volatile lines of business.”
Topics Agribusiness AM Best
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