AM Best Revises Outlooks to Negative for Agricultural Workers Auto Insurance Company

OLDWICK, N.J.--(BUSINESS WIRE)--
AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A- (Excellent) and Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” (Excellent) of Agricultural Workers Mutual Auto Insurance Company (Ag Workers) (Forth Worth, TX).

The Credit Ratings (ratings) reflect Ag Workers’ balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

The revised outlooks to negative reflect key metrics of balance sheet strength that compare unfavorably over the past five years with Ag Workers’ peer group with a similar balance sheet strength baseline Long-Term ICR assessment. Such metrics include (but are not necessarily limited to) policyholders’ surplus growth, underwriting leverages and loss reserve development trends.

These unfavorable rating attributes are exacerbated further by a deterioration of the company’s risk-adjusted capitalization relative to the previous year, which was driven primarily by a decline in policyholders’ surplus resulting from rising underwriting loss. Further, the payment structure of policyholder dividends has had a suppressive effect on policyholders’ surplus growth over the longer term.

Ag Workers’ adequate operating performance is viewed by results before policyholder dividends, for which underwriting performance is in line with industry composite benchmarks. However, the policyholder dividend payment structure constrains overall underwriting performance and negatively impacts pre-tax return on revenue and equity measures. Ag Workers’ limited business profile assessment is driven largely by its product focus concentrated geographically in Texas, which exposes results to frequent and severe weather-related events, as well as potential judicial, economic, competitive and regulatory challenges. AM Best assesses Ag Workers’ ERM as appropriate, as its risk management capabilities are appropriately commensurate with the complexity of the business, and align well with the company’s risk profile.

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 © 2022 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Christopher Jackson
Financial Analyst

+1 908 439 2200, ext. 5721

[email protected]

Christopher Sharkey

Manager, Public Relations

+1 908 439 2200, ext. 5159

[email protected]

Brian O’Larte

Director

+1 908 439 2200, ext. 5138

brian.o'[email protected]

Jeff Mango

Managing Director,

Strategy Communications

+1 908 439 2200, ext. 5204

[email protected]

Source: AM Best