OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has downgraded the financial strength rating to B++ (Good) from A- (Excellent) and issuer credit rating to “bbb” from “a-” of Farm Bureau Mutual Insurance Company of Arkansas, Inc. (Arkansas Farm Bureau) (Little Rock, AR). The ratings remain under review with the implications revised to developing from negative.

The rating downgrades reflect Arkansas Farm Bureau’s deteriorating stand-alone operating performance characterized by heavy weather-related losses in recent years, which has resulted in a steady erosion of its surplus levels. The company has posted its fourth straight year of underwriting losses and accompanying unfavorable combined ratios. Should these unfavorable trends continue in 2012, additional pressure could be placed on the company’s ratings.

Arkansas Farm Bureau is currently in the process of merging with three other mutual entities: Colorado Farm Bureau Mutual Insurance Company, LouisianaFarm Bureau Mutual Insurance Company and South Carolina Farm Bureau Mutual Insurance Company.

The merger is expected to result in an entity with a significantly greater premium and capital base, along with a wider geographic spread. Thus, the under review status of Arkansas Farm Bureau reflects the potential for changes in its risk-adjusted capitalization along with its business and risk profile. A.M. Best plans to resolve the under review status upon completion of the transaction. Pending regulatory and policyholder approvals, the transaction is expected to be completed by year-end 2012.

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: “Understanding BCAR for Property/Casualty Insurers”; “Risk Management and the Rating Process for Insurance Companies” and “Catastrophe Analysis in A.M. Best Ratings.” 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.

A.M. Best Co.
Neil Das Gupta, 908-439-2200, ext. 5206
Financial Analyst
neil.dasgupta@ambest.com
or
Joseph A. Burtone, 908-439-2200, ext. 5125
Assistant Vice President
joseph.burtone@ambest.com
or
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
rachelle.morrow@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com

Source: A.M. Best Co.