Oldwick, New Jersey, June 25, 2024–(Business Wire)–AM Best We have lowered the financial strength ratings (FSRs) of North Carolina Farm Bureau Mutual Insurance Company and Farm Bureau Insurance of NC, Inc. (collectively, North Carolina Farm Bureau Insurance Group (North Carolina Farm Bureau)) from A (Excellent) to A- (Excellent) and the long-term issuer credit ratings (Long-term ICRs) from “a+” (Excellent) to “a-” (Excellent). The outlook for the long-term ICR has been revised to stable from negative and the outlook for the FSR is stable. Both companies are located in Raleigh, North Carolina.
The credit ratings (the Ratings) reflect North Carolina Farm Bureau's balance sheet strength, which AM Best assesses as very strong, marginal operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The downgrade reflects a deterioration in North Carolina Farm Bureau's key balance sheet strength and operating margin metrics, which are impacted by a decline in the group's risk-adjusted capital. In addition, the group's operating performance has been volatile over the past several years, with significant deterioration in underwriting performance over the last two years and in the first quarter of 2024. As a result, the group's five-year average operating margin metrics are below its commercial passenger standard auto and homeowners insurance combined metrics. North Carolina Farm Bureau's underwriting performance is challenged by inflation, weather-related losses, rising reinsurance costs, the elimination of quota share agreements, and regulatory restrictions on rates. Management is taking multiple corrective actions to restore the group's underwriting profitability.
The Group's neutral business profile is supported by its strong presence as the third largest bond issuer in North Carolina and its relationship with the North Carolina Federation of Agricultural Associations, which has an ERM program appropriate to the size and scale of its operations.
The stable outlook reflects AM Best's expectation that North Carolina Farm Bureau will maintain the group's risk-adjusted capital at levels that support the current ratings and that its operating performance will stabilize as management continues to take various steps to improve underwriting performance.
This press release relates to credit ratings published on AM Best's website. All rating information and appropriate disclosures relevant to the release, including details of the office responsible for issuing each individual rating referenced in this press release, are available from AM Best's website at: Recent evaluation activities For additional information regarding the uses and limitations of credit rating opinions, Best Credit Rating GuideInformation regarding the proper use of Best's Credit Ratings, Best's Performance Ratings, Best's Preliminary Credit Ratings and AM Best press releases can be found here. Best Ratings and a Guide to Using Ratings Properly.
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