A.M. Best Downgrades Ratings of RVOS Farm Mutual Insurance Group and Its Members

A.M. Best Downgrades Ratings of RVOS Farm Mutual Insurance Group and Its Members

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has downgraded the financial strength rating to A- (Excellent) from A (Excellent) and issuer credit ratings to “a-” from “a” of RVOS Farm Mutual Group (RVOS) and its members, RVOS Farm Mutual Insurance Company and Priority One Insurance Company. The outlook for all ratings is negative. All companies are domiciled in Temple, TX.

The downgrades and outlook are a result of the continued deterioration in RVOS’s risk-adjusted capitalization and operating performance in recent years. In 2008, the group’s surplus declined by 30% due to Hurricane Ike, which accounted for over $12 million in net losses. In addition, the group recorded significant unrealized capital loses in 2008. Although these investment losses have partially rebounded in 2009, underwriting losses remain elevated. As a result, surplus declined by nearly 15% through third quarter 2009.

Furthermore, RVOS’ underwriting expense ratio is unfavorable, having increased in successive years prior to 2009 due to technology expenditures and increased reinsurance cost. Although the group has adequate risk-adjusted capitalization for its ratings and has implemented rate increases and various re-underwriting initiatives, the negative outlook is reflective of the uncertainty associated with the successful implementation of these efforts.

For Best’s Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.

A.M. Best Co.

Analysts

Bob Podolski

(908) 439-2200, ext. 5731

[email protected]

or

Joseph Burtone

(908) 439-2200, ext. 5125

[email protected]

or

Public Relations

Jim Peavy

(908) 439-2200, ext. 5644

[email protected]

or

Rachelle Morrow

(908) 439-2200, ext. 5378

[email protected]

Source: A.M. Best Co.

Copyright Business Wire 2009 A.M. Best Co. has downgraded the financial strength rating to A- from A and issuer credit ratings to "a-" from "a" of RVOS Farm Mutual Group and its members, RVOS Farm Mutual Insurance Company and Priority One Insurance Company. The downgrades and outlook are a result of the continued deterioration in RVOS's risk-adjusted capitalization and operating performance in recent years.