AM Best Downgrades Credit Ratings of Louisiana Farm Bureau Mutual Insurance Company

OLDWICK, N.J.--(BUSINESS WIRE)--
AM Best has downgraded the Financial Strength Rating to B++ (Good) from A- (Excellent) and the Long-Term Issuer Credit Rating to “bbb” (Good) from “a-” (Excellent) of Louisiana Farm Bureau Mutual Insurance Company (Louisiana Farm Bureau) (Baton Rouge, LA). The outlook of these Credit Ratings (ratings) is negative.

The ratings reflect Louisiana Farm Bureau’s balance sheet strength, which AM Best assesses as strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM).

The rating downgrades reflect deterioration in Louisiana Farm Bureau’s key balance sheet strength and operating return metrics, which have come in the form of policyholder’s surplus erosion and declining levels of risk-adjusted capitalization. In addition, operating performance has trended downward over the past few years and was adverse particularly in 2023. The volatility has stemmed predominately from much higher reinsurance costs over the past several years following catastrophe loss activity from Hurricanes Ida, Laura and Delta. Also, inflationary pressures on loss costs and convective storm activity over the past few years has contributed further to the deterioration. As a result, the company’s five-year average operating return metrics have fallen materially relative to the personal property industry composite. Surplus has also fallen in four out of the past five years, with the largest decline occurring in 2023.

Management has addressed the adverse trends through sizable rate increases, and stricter underwriting guidelines. These rate increases should somewhat offset the material increase in reinsurance costs. In an effort to stabilize its operating performance and balance sheet strength metrics, Louisiana Farm Bureau also continues to focus diligently on managing its coastal exposures, property inspections, and refining its underwriting standards. However, given the severity of loss over the past several years, it remains to be seen whether these initiatives will be proven effective. As a result, there is a negative outlook for the ratings, which encompasses pressure on the company’s ERM building block assessment. If these trends continue, there could be a downward revision in the company’s ERM assessment.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2024 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Lauren Magro
Financial Analyst

+1 908 882 2082

lauren.magro@ambest.com

Christopher Sharkey
Associate Director, Public Relations

+1 908 882 2310

christopher.sharkey@ambest.com

Joseph Burtone
Director

+1 908 882 1678

joseph.burtone@ambest.com

Al Slavin
Senior Public Relations Specialist

+1 908 882 2318

al.slavin@ambest.com

Source: AM Best