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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MAY 26, 2010 12:00 AM (EDT)
A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating of A (Excellent) and issuer credit rating of "a" of American Agricultural Insurance Company (American Ag) (Indianapolis, IN).
While the rating affirmations reflect American Ag's risk-adjusted capitalization, which is supportive of the current ratings, the revised outlook reflects the company's continuing unfavorable underwriting performance.
American Ag, which is the primary reinsurer for insurance companies affiliated with the various Farm Bureau Federations (Farm Bureau), posted a nearly $80 million underwriting loss in 2009. This loss was preceded by an approximately $38 million underwriting loss in 2008. These underwriting losses caused the company to suffer consecutive operating losses in 2008 and 2009, resulting in a moderate loss of surplus in both years.
Similar to 2008, American Ag's underwriting results in 2009 were negatively impacted by several significant storm events primarily in the Midwestern states. This affected the Farm Bureau book of business, which represents approximately two-thirds of American Ag's total writings. However, nearly a third of American Ag's portfolio is comprised of non-Farm Bureau risks with somewhat more coastal exposure, which has performed reasonably well over the past two years in the relative absence of major hurricanes and tropical storms.
For Best's Credit Ratings, an overview of the rating process and rating methodologies, please visit Best's Ratings & Analysis.
The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at Best's Credit Rating Methodology.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers.