Gainesville domiciled Florida Farm Bureau Group has had its Financial Strength Rating of B++ (Good) and Long-Term Issuer Credit Ratings of “bbb+” (Good) placed under review with negative implications by AM Best, following a considerable decline in the group’s key balance sheet strength metrics.
Florida Farm Bureau Casualty Insurance Company and its fully reinsured subsidiary, Florida Farm Bureau General Insurance Company, collectively make up the Florida Farm Bureau Group.
The ratings agency notes that the erosion in policyholders’ surplus through September 30th, 2023, was driven primarily by losses from Hurricane Idalia, which exceeded Florida Farm Bureau Group’s occurrence catastrophe retention level, meaning it would have made reinsurance recoveries.
The surplus volatility concurrent with ongoing increases in net premiums written due to rate activity has resulted in elevated underwriting leverage measures.
There was also a notable drop in the group’s overall level of risk-adjusted capitalization, reports AM Best.
AM Best added that the management plans on implementing various capital management strategies to address elevated underwriting leverage as the group rebuilds surplus through operating results.
The ratings company expects that these strategies, alongside sizable rate increases, a refined book of business and recently enacted legislative changes in the Florida property insurance market, will support the improvement in its key balance sheet strength.
However, the ratings will remain under review with negative implications until AM Best finishes the analysis of the impact of management’s plans.
If the strategies do not come to fruition as anticipated or fail to alleviate pressure on key balance sheet strength metrics substantially, AM Best warns that a further rating action is likely.
