OLDWICK, NJ–(BUSINESS WIRE)–AM Best revised the outlook from stable to negative and affirmed the financial strength rating of A- (Excellent) and the issuer’s long-term credit rating (long-term ICR) of “a-” (Excellent) of the Farm Workers’ Mutual Automobile Insurance Company (Ag Workers) (Forth Worth, TX).
The credit ratings (ratings) reflect the strength of Ag Workers’ balance sheet, which AM Best rates as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
The revised to negative outlook reflects key measures of balance sheet strength that compare unfavorably over the past five years with the farmworker peer group with a baseline balance sheet strength similar to the long-term ICR rating. These parameters include (but are not necessarily limited to) policyholder surplus growth, underwriting leverages and loss reserve development trends.
These unfavorable rating attributes are further exacerbated by a deterioration in the company’s risk-adjusted capitalization compared to the prior year, primarily due to a decline in policyholder surplus resulting from higher underwriting losses. In addition, the policyholder dividend payout structure has had an inhibiting effect on the growth of long-term policyholder surplus.
Ag Workers’ adequate operating performance is considered by earnings before policyholder dividends, for which underwriting performance is in line with industry composite benchmarks. However, the policyholder dividend payout structure limits overall underwriting performance and negatively impacts pre-tax return on revenue and equity measures. The limited assessment of Ag Workers’ business profile is largely driven by the geographic concentration of its products in Texas, which exposes the results to frequent and severe weather events, as well as potential legal, economic and , competitive and regulatory. AM Best rates agricultural worker ERM as appropriate because its risk management capabilities are appropriately proportionate to 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 relevant disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit AM Best’s Recent Rating Activity web page. For more information on the use and limitations of credit rating opinions, please see Best’s Guide to Credit Ratings. For more information on the proper use of Best’s Credit Scores, Best’s Performance Ratings, Best’s Preliminary Credit Ratings, and AM Best’s press releases, please see the Guide to Proper Use of Best’s Best ratings and reviews.
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 more than 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 AM Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.