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A.M. Best Co. has removed from under review with positive implications and upgraded the financial strength rating to B++ (Good) from B+ (Good) and issuer credit rating to “bbb” from “bbb-” of Louisiana Farm Bureau Mutual Insurance Company (Louisiana Farm Bureau) (Baton Rouge, LA). The outlook assigned to both ratings is stable.
Louisiana Farm Bureau’s ratings reflect its solid risk-adjusted capitalization and favorable underwriting and operating performance in recent years, as it has benefited from milder weather patterns as well as improved underwriting earnings from re-underwriting initiatives, including rate adjustments, and increased monitoring and management of risk exposures along both coastal and inland areas. While the company is well positioned at its current rating level, as a property writer in a single state with coastal exposures, it remains susceptible to severe weather events that could adversely impact its operating results and surplus position, thereby placing negative pressure on the ratings.
Louisiana Farm Bureau has been in the process of merging with three other mutual entities since early 2011: Farm Bureau Mutual Insurance Company of Arkansas, Inc., Colorado Farm Bureau Mutual Insurance Company and South Carolina Farm Bureau Mutual Insurance Company. While the merger is expected to result in an entity with a significantly greater premium and capital base, along with a wider geographic spread, the removal of the under review status of Louisiana Farm Bureau is based on its current circumstances. Louisiana Farm Bureau’s ratings are not expected to be significantly impacted by the completion of the merger process. Pending regulatory and policyholder approvals, the transaction is expected to be completed by year-end 2013.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Understanding BCAR for Property/Casualty Insurers”; “Risk Management and the Rating Process for Insurance Companies”; “Catastrophe Analysis in A.M. Best Ratings”; and “Equity Credit for Hybrid Securities.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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