AM Best Revises Issuer Credit Rating Outlook to Negative for Farmers Mutual Insurance Company of Nebraska
May 23 2024 - 9:28AM
Business Wire
AM Best has revised the outlook to negative from stable
for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed
the Financial Strength Rating (FSR) of A (Excellent) and the
Long-Term ICR of “a+” (Excellent) of Farmers Mutual Insurance
Company of Nebraska (Farmers of Nebraska) (Lincoln, NE). The
outlook of the FSR is stable.
In addition, AM Best has assigned a Long-Term Issue Credit
Rating of “a-” (Excellent) to the $100 million, 9% surplus notes,
due May 2044, issued by Farmers of Nebraska. The outlook assigned
to this Credit Rating (rating) is negative.
The ratings reflect Farmers of Nebraska’s balance sheet
strength, which AM Best assesses as strongest, as well as its
adequate operating performance, neutral business profile and
appropriate enterprise risk management (ERM).
The revised Long-Term ICR outlook to negative for Farmers of
Nebraska reflects a deterioration in policyholders’ surplus due to
significant underwriting losses driven by weather events the
company experienced in 2022 and to a lesser extent in 2023. As a
result of the deterioration in surplus, some balance sheet strength
metrics have begun to trail similarly rated peers. The issuance of
the surplus notes should mitigate surplus deterioration but exposes
the company to potential strains from debt servicing, which could
have a negative impact on future operating cash flows.
The company balance sheet strength assessment of strongest is
supported by its risk-adjusted capitalization being at the
strongest level, as measured by Best’s Capital Adequacy Ratio
(BCAR). Additional factors include the companies’ favorable
liquidity and generally consistent and favorable loss reserve
development, which are partially offset by underwriting leverage
and reinsurance dependence metrics that are modestly above the
composite’s average. The adequate operating performance reflects
the company’s continued underwriting discipline, despite
significant losses seen in 2022 and net income in just three of the
past five years. The neutral business profile continues to focus on
the company’s market-leading position in the personal lines
business in its core states of Nebraska and South Dakota. Farmers
of Nebraska’s ERM program is considered appropriate for its risk
profile and includes prudent reinsurance protection with
comprehensive risk mitigation strategies.
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.
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Daniel Mangano, CPCU Senior Financial Analyst
+1 908 882 1907 daniel.mangano@ambest.com Joseph
Burtone Director +1 908 882 1678
joseph.burtone@ambest.com Christopher Sharkey Associate
Director, Public Relations +1 908 882 2310
christopher.sharkey@ambest.com Al Slavin Senior Public
Relations Specialist +1 908 882 2318
al.slavin@ambest.com