AM Best Downgrades Credit Ratings of Texas Farm Bureau

AM Best has downgraded the Financial Strength Rating (FSR) to B++ (Good) from A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) to “bbb+” (Good) from “a-” (Excellent) of Texas Farm Bureau Casualty Insurance Company and its affiliates, Farm Bureau County Mutual Insurance Company of Texas, Texas Farm Bureau Mutual Insurance Company and Texas Farm Bureau Underwriters.

The outlook of the FSR has been revised to stable from negative while the outlook of the Long-Term ICR is negative. All companies are domiciled in Waco, Texas, and are collectively referred to as Texas Farm Bureau Insurance Group (the group).

The Credit Ratings (ratings) reflect Texas Farm Bureau Insurance Group’s balance sheet strength, which AM Best assesses as strong, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management.

AM Best said the rating downgrades reflect deterioration in Texas Farm Bureau Insurance Group’s key balance sheet strength metrics through June 2024, which were affected by a 21.5% reduction in its policyholder surplus that resulted in declining levels of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR).

The corrosion in policyholder surplus was driven by underwriting losses resulting from a higher frequency of severe weather-related events in Texas, particularly in May, as well as the group’s increased reinsurance retention for 2024.

The group’s business profile is neutral, AM Best said, supported by its market penetration as a leading personal lines writer in Texas, along with its broad product offering. In addition, the assessment takes into account the group’s relationship with the Texas Farm Bureau, which enhances customer loyalty and affinity. The group’s marginal operating performance assessment reflects volatility in its underwriting results over the past few years, which adds pressure to its neutral business profile assessment, AM Best said.