A.M. Best Revises Outlook to Stable for Georgia Farm Bureau Group Members

A.M. Best has revised the outlook to stable from negative and affirmed the financial strength rating of B+ (Good) and the issuer credit rating of “bbb-” of Georgia Farm Bureau Mutual Insurance Co. and Georgia Farm Bureau Casualty Insurance Co., collectively referred to as the Georgia Farm Bureau Group (GFB). All companies are domiciled in Macon, Ga.

The affirmation reflects GFB’s risk-adjusted capitalization, which adequately supports its rating level. The company also benefits from the sponsorship of the Georgia Farm Bureau Federation, which facilitates marketing efforts and enhances customer loyalty and affinity. Additionally, management has been undertaking initiatives to restore operational profitability, including rate increases where needed, reducing concentrated exposures and re-underwriting its book of business through data analytics, thereby leading to better risk selection.

Partially offsetting these positive rating factors is GFB’s generally unfavorable operating performance, as reflected by its volatile operating and underwriting results in four of the past five years. As a result, its five-year average pre-tax returns on revenue and surplus are negative and compare unfavorably with the private passenger standard auto and homeowners composites.

GFB’s unfavorable underwriting and operating performance during the latest five-year period is attributed primarily to frequent and severe weather events that have periodically fallen below the company’s catastrophe retention. Furthermore, GFB’s business concentration in Georgia exposes it to regulatory and legislative changes in a single state.

However, the revision of the outlook to stable from negative reflects GFB’s steadily improving trend of underwriting performance, with the company posting a modest underwriting profit in 2014. Underwriting results have been positive in six of the preceding eight quarters while improving risk-adjusted capitalization levels. Further, GFB has a strong reinsurance program, retains excellent liquidity measures and has had a long-standing local market presence.

Factors that could result in negative rating actions include a return to unfavorable underwriting performance and/or a significant erosion of its capital base. Conversely, a sustained improvement in operating results, along with maintenance of favorable risk-adjusted capitalization, could lead to an upward revision in its rating outlook.

Topics Trends Underwriting Georgia Agribusiness AM Best