AM Best Revises Outlook to Negative for Louisiana Farm Bureau Mutual

AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Louisiana Farm Bureau Mutual Insurance Company (Louisiana Farm Bureau) (Baton Rouge, LA).

The Credit Ratings (ratings) reflect Louisiana 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).

The revised outlooks consider the declining trend in Louisiana Farm Bureau’s operating results over recent years. These trends arose due to pricing inadequacies in its core lines of business following severe catastrophic weather activity, along with elevated costs for reinsurance, and higher loss severity due to inflation. As a result, the company’s combined ratio has been above breakeven in three of the past five years, highly influenced by earned premiums that continue to sink as reinsurance prices increase. Ultimately, the deterioration has caused the company’s five-year average operating return measures to lag the personal property industry composite and has begun to shift the company away from other carriers assessed as adequate. In the absence of improvement, the ratings are likely to be downgraded.

Despite modest surplus declines, Louisiana Farm Bureau’s balance sheet continues to be supported by its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), comprehensive reinsurance program, and conservative investment portfolio. The business profile assessment reflects the company’s geographic and product concentration as a property writer in a hurricane-prone state. Lastly, Louisiana Farm Bureau’s ERM practices remain appropriate and in line with its risk profile, with a focus on exposure management, pursuing rate adequacy, and aggressive reunderwriting of its current book.

Source: AM Best

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