AM Best downgrades Farm Bureau P&C Group due to natural cat losses

Members of the Farm Bureau Property & Casualty Insurance Group saw a 30% decrease in surplus in Q2’24 due to significant catastrophe losses, including a large hail storm in May and a wildfire in June, leading AM Best to downgrade their Credit Ratings.

As a result, key measures of balance sheet strength have weakened and no longer align with the strongest assessment, leading to a downgrade from ‘strongest’ to ‘very strong’.

AM Best downgraded its Long-Term Issuer Issuer Ratings to ‘a’ from ‘a+’ and affirmed the Financial Strength Rating of A for both Farm Bureau Property & Casualty Insurance Company and Western Agriculture Insurance Company, collectively known as Farm Bureau Property & Casualty Group. The outlook on these ratings was revised to negative from stable.

The negative outlook reflects the significant volatility in the group’s operating results in recent years and the continuing pressure on its balance sheet strength.

Severe weather events and adverse reserve development activities since 2022 have led to high combined ratios and significant operating losses.

If these operating performance trends continue, the group may become even more out of sync with other adequately rated companies.

The administration is working to address these challenges by adjusting pricing, increasing minimum deductibles, and improving underwriting strategies, but the effectiveness of these measures remains uncertain.

AM Best concluded, “Further downgrades are likely as operating results deteriorate further and/or policyholder surplus and key balance sheet strength metrics continue to weaken.”