AM Best has downgraded the Financial Strength Rating to A- (Excellent) from A (Excellent) and the Long-Term Issuer Credit Rating to a- from a of Farm Bureau Mutual Insurance Company of Idaho and its indirect subsidiary, Western Community Insurance Company, collectively referred to as Farm Bureau of Idaho Group (Farm Bureau of Idaho). The outlooks for all Credit Ratings (ratings) remain negative. All companies are domiciled in Pocatello, ID.
The ratings reflect Farm Bureau of Idahos balance sheet strength, which AM Best categorizes as very strong, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The rating downgrades reflect a revision in AM Bests assessment of the groups operating performance to marginal from adequate. This action is in response to adverse trends in the groups underwriting performance over the past five years. Overall operating results have been volatile over the last five years and the groups five-year average combined ratio lags the private passenger standard and auto homeowners composite. The groups adverse performance was driven by increased catastrophe losses in recent years coupled with an ERM program that fell short in identifying the full exposures of the groups book of business. Management has taken steps to improve performance, including an additional purchase of top layer reinsurance based on better modeled data and also increased of the groups budget for storm activity, which has been on the rise in the last two years in Idaho.
The outlook remains negative driven by a risk management program that has been an area of challenge for Farm Bureau of Idaho. Risk identification of catastrophe exposures, management of loss reserve development and adequacy of exposure models (e.g. deterministic models, wildfire models) have proved problematic. Management has taken aggressive actions as it pertains to its risk management practices through implementation of deterministic modeling, more detailed geocoding of exposures, use of wildfire models, increased purchase of reinsurance protection and increased reserve audits that are intended to stabilize and improve underwriting profitability.
This press release relates to Credit Ratings that have been published on AM Bests website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Bests Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Bests Credit Ratings. For information on the proper media use of Bests Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Bests Credit Ratings and AM Best Rating Action Press Releases.
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