South Central Ratings Roundup
Credit Ratings of Oklahoma Farm Bureau Mutual Group Upgraded
Ratings agency AM Best has upgraded the Financial Strength Rating to B++ (Good) from B+ (Good) and the Long-Term Issuer Credit Ratings to “bbb” from “bbb-” for the members of the Oklahoma Farm Bureau Group: Oklahoma Farm Bureau Mutual Insurance Co. and its wholly owned subsidiary, AgSecurity Insurance Co., collectively referred to as Oklahoma Farm Bureau. All companies are headquartered in Oklahoma City.
The ratings outlook is stable.
AM Best said the ratings reflect Oklahoma Farm Bureau’s balance sheet strength, which the ratings agency categorizes as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
The upgrades reflect the sustained improvement in the group’s operating performance, evidenced by its five-year average combined ratio, operating ratio and total return on equity, which compare favorably with the composite averages.
The improved results stem from underwriting initiatives implemented in earlier years, which include increased rates, mandatory wind/hail deductibles, and comprehensive reinsurance programs that insulate policyholder surplus from frequency of events and shock losses.
Management’s aggressive actions in overall risk management and exposure have resulted in consistent and stable operating results, which is the main driver of the rating upgrades.
The positive trends in operating performance are offset somewhat by the historical volatility in the group’s balance sheet and operating performance.
Material losses in earlier years eroded capital, which was replaced subsequently by high interest surplus note obligations. As a result, the group’s investment returns have been hindered by interest payments on the notes. Likewise, the group’s quality of capital was stressed, as the surplus notes comprised a large percentage of total surplus.
In recent years, the group has been able to reduce the surplus notes to less material percentage of surplus. However, the repayments were slowed somewhat by elevated underwriting expenses, due to ongoing internal system enhancements.
The Oklahoma Farm Bureau noted on its website that its credit rating has been raised three times in the last four years.
“I am extremely proud of our company and the progress we have made in the past four years,” Gary Bucker, executive vice president and general manager of Oklahoma Farm Bureau Insurance, said in a media announcement in response to the ratings upgrade. “As the largest domestic insurance company in Oklahoma, our employees and leadership team are proud to provide insurance products and services that protect our friends and neighbors across the state, and this improved rating only underscores that fact.”
Oklahoma Farm Bureau, established in 1946, serves all 77 counties in the state.