AM Best has revised the outlook to negative from stable for the Long-Term Issuer Credit Ratings of Tennessee Farmers Insurance Companies (TFIC), a move influenced by the company’s deteriorating performance due to large claims resulting from significant weather events.
The credit rating agency also affirmed the company’s Financial Strength Ratings (FSR) of A+ (Superior) and the Long-Term ICRs of “aa” (Superior). The outlook of the FSRs is stable.
Both credit rating moves affect Tennessee Farmers Mutual Insurance Company and its affiliate Tennessee Farmers Assurance Company, which are members of TFIC.
At the same time, AM Best has affirmed the FSR of A+ (Superior) and the Long-Term ICR of “aa-” (Superior) of Tennessee Farmers Life Insurance Company (TFLIC). The outlook of these Credit Ratings (ratings) is stable.
“The ratings reflect TFIC’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM),” the credit rating agency stated.
Highlighting: “The revision of the Long-Term ICR outlook to negative from stable reflects AM Best’s concern that TFIC will not be able to reverse the negative trend in its operating performance over the near-term.
“The recent deterioration in performance is due to a period of heightened frequency and severity of large claims as a direct impact of severe windstorms (convective storms including tornadoes) that occurred in March 2023, which developed into the second most significant weather event in the group’s history.”
TFIC’s balance sheet strength assessment is supported by its risk-adjusted capitalization, which remained at the strongest level at year-end 2023 according to Best’s Capital Adequacy Ratio (BCAR).
Low underwriting leverage ratios, consistently favourable reserve development and a low-risk investment profile also contributed to the company’s strength of its balance sheet.
AM Best also noted that the favourable business profile reflects TFIC’s strong market leadership position in a competitive environment, where a productive and stable distribution agency is leveraged throughout the regions of Tennessee – as the group’s purpose is to service the farmer community in the state.
The company’s stable outlooks reflect AM Best’s expectation that TFLIC will maintain its balance sheet strength, which remained at the strongest level at year-end 2023, as measured by BCAR.
This expectation also applies to TFIC’s operating performance and business profile assessments over the intermediate term. The last factor is neutral, reflecting the company’s strong market position in a competitive environment, analysts noted.
