AM Best has revised the implications of the under review status to positive from developing for the Financial Strength Rating of B (Fair) and the Long-Term Issuer Credit Rating of “bb” (Fair) of Farm Bureau Mutual Insurance Company of Arkansas, Inc. (Farm Bureau of Arkansas) (Little Rock, AR).
The Credit Ratings (ratings) reflect Farm Bureau of Arkansas’ balance sheet strength, which AM Best assesses as adequate, as well as its marginal operating performance, limited business profile and marginal enterprise risk management.
This action follows the announcement that Farm Bureau of Arkansas and Southern Farm Bureau Casualty Insurance Company (Southern Farm Bureau) have approved a sponsored demutualization transaction. In this transaction, Farm Bureau of Arkansas will convert into a stock company and Southern Farm Bureau will purchase the entire stock of the newly formed company, at which point Farm Bureau of Arkansas will become a wholly owned subsidiary of Southern Farm Bureau. The transaction is to be secured via 100% reinsurance quota share agreement, resulting in Farm Bureau of Arkansas becoming a member under the Southern Farm Bureau Casualty Group.
The under review with positive implications status reflects the opportunity for improved financial performance for Farm Bureau of Arkansas if it becomes a subsidiary of Southern Farm Bureau. Southern Farm Bureau is a leading personal lines writer in the Southeastern U.S. with sufficient financial flexibility and a history of supporting its subsidiaries when necessary. While the transaction progresses, Southern Farm Bureau has continued to show its support to Farm Bureau of Arkansas by issuing a new surplus debenture and providing additional reinsurance support.
AM Best expects that subsequent to regulatory approvals and customary closing conditions, the transaction is anticipated to close sometime in the third quarter of 2025. The ratings will remain under review with positive implications pending the completion of the transaction and until AM Best can evaluate the reinsurance contract appropriately between Southern Farm Bureau and Farm Bureau of Arkansas.
Topics Agribusiness AM Best
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