Marketing

A.M. Best Downgrades Ratings of Michigan Farm Bureau Group and Its Members

  2012 APR 21 - (VerticalNews.com) -- A.M. Best Co. has downgraded the financial strength rating to B++ (Good) from A- (Excellent) and issuer credit ratings to "bbb+" from "a-" of the Michigan Farm Bureau Group and its members, Farm Bureau Mutual Insurance Company of Michigan and Farm Bureau General Insurance Company of Michigan. The outlook for all ratings has been revised to stable from negative. All companies are domiciled in Lansing, MI.

  These rating actions are a result of the group's unfavorable operating performance, which has produced a declining trend in its risk-adjusted capitalization. Operating performance over the last four years has been adversely impacted by significant underwriting losses due to higher than anticipated claims on its predominate homeowners, farmowners and automobile lines of business. In addition, investment returns over this period include investment losses in 2008 from the collapse of the financial markets. These results are reflective of several years of competitive pricing, an increase in the mandatory retention on automobile personal injury claims, increasing frequency of property claims, above average investment leverage in common equities and persistently low interest rates.

  The group's ratings are reflective of its supportive risk-adjusted capitalization and leadership position as one of the top providers of farmowners, personal lines auto and homeowners' insurance in Michigan. In addition, the group benefits from its association with the Michigan Farm Bureau, which facilitates marketing, business retention and government relations efforts.

  Partially offsetting these strengths are the organization's single state concentration of risk, strong competitive market pressures, weak economic conditions and a generous no-fault auto system offering unlimited personal injury protection coverage. Additionally, the group relies heavily on reinsurance protection from the Michigan Catastrophic Claims Association. These concerns are partially mitigated by its strong customer service focus and management's actions to improve profitability by canceling unprofitable accounts, reunderwriting a significant portion of its property book, increasing rates, decreasing expenses and development of a comprehensive enterprise risk management program.

  The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: "Catastrophe Analysis in A.M. Best Ratings"; Risk Management and the Rating Process for Insurance Companies"; "Understanding BCAR for Property/Casualty Insurers"; and "Rating Members of Insurance Groups." Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology. Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com. Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

  Keywords: Real Estate, Transportation, Finance and Financials, Investing and Investments.

  This article was prepared by VerticalNews Marketing editors from staff and other reports. Copyright 2012, VerticalNews Marketing via VerticalNews.com.