AM Best Revises Outlook to Negative for Oklahoma Farm Bureau Mutual

AM Best has revised the outlook to negative from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term ICRs of “bbb+”(Good) for the members of the Oklahoma Farm Bureau Group: Oklahoma Farm Bureau Mutual Insurance Company and its wholly owned subsidiary, AgSecurity Insurance Company, collectively referred to as Oklahoma Farm Bureau. The outlook of the FSR is stable. All companies are domiciled in Oklahoma City, Oklahoma.

The Credit Ratings (ratings) reflect Oklahoma Farm Bureau’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

AM Best said the revision of the Long-Term ICR outlooks to negative from stable reflects pressure on Oklahoma Farm Bureau’s operating performance assessment given multiple years of underwriting losses, which have been impacted by frequent and severe weather, inflation and increased cost of reinsurance.

Consequently, operating performance metrics are no longer closely aligned with other adequately assessed rated carriers, the rating agency said. While management has and continues to address the deterioration in the group’s operating performance by implementing various corrective actions, including rate increases, and reunderwriting initiatives, the overall effectiveness of these actions remains to be seen.

Oklahoma Farm Bureau’s balance sheet strength, which AM Best assesses as very strong, continues to be supported by its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), a conservative investment portfolio, relatively low reserve leverage and historically favorable reserve development.

The group’s limited business profile assessment is indicative of the concentration risk as a single-state writer in the state of Oklahoma, which leaves results susceptible to weather and regulatory risk. In addition, the limited business profile assessment reflects its high property lines exposure. However, the group is the largest domestic carrier in the state of Oklahoma and controls the largest share of the farm and ranch market in the state.

Oklahoma Farm Bureau’s ERM remains appropriate, inclusive of a formal ERM program that is appropriate for the complexity of the group’s overall risk profile, as well as a comprehensive reinsurance program, which provides top-level limit well into its tail exposure.

Source: AM Best

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