A.M. Best Downgrades Ratings of American Agricultural Insurance Company

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has downgraded the financial strength rating to A- (Excellent) from A (Excellent) and issuer credit rating to “a-” from “a” of American Agricultural Insurance Company(AAIC) (Indianapolis, IN). The outlook for both ratings has been revised to stable from negative.

The rating downgrades reflect AAIC’s poor underwriting performance and surplus losses in recent years, which have continued into 2011. AAIC has experienced significant underwriting losses over the past five years, with a five-year average combined ratio that is considerably worse than the reinsurance composite. Although the company has reduced net retained exposure, frequent and severe catastrophe events have resulted in continued underwriting losses.

However, AAIC maintains a strong risk-adjusted capitalization, which is derived from its conservative operating strategies. In addition, AAIC maintains a favorable expense structure and has a long standing relationship with the Farm Bureau insurance companies. Furthermore, AAIC’s investment portfolio is relatively conservative, and it has a unique market position as the primary reinsurer to the Farm Bureau insurance companies.

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; “Catastrophe Analysis in A.M. Best Ratings”; “Natural Catastrophe Stress Test Methodology”; “Catastrophe Risk Management Incorporated Within the Rating Analysis”; “Equity Credit for Hybrid Securities”; and “A.M. Best Ratings & the Treatment of Debt.” Methodologies 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 © 2011 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.

A.M. Best Co.
Frederick DeLeon
Senior Financial Analyst
908-439-2200, ext. 5715
[email protected]
or
Gary Davis
Assistant Vice President
908-439-2200, ext. 5665
[email protected]
or
Rachelle Morrow
Senior Manager, Public Relations
908-439-2200, ext. 5378
[email protected]
or
Jim Peavy
Assistant Vice President, Public Relations
908-439-2200, ext. 5644
[email protected]

Source: A.M. Best Co.