OLDWICK, NJ, Apr 29, 2022†BUSINESS WIRE†AM Best has revised the outlook from stable to negative and revised the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” (Excellent) of Agricultural Workers Mutual Auto Insurance Company (Ag workers) (Forth Worth, TX).
The Credit Ratings (ratings) reflect the strength of Ag Workers’ balance sheet, which is rated as very strong by AM Best, as well as its adequate business performance, limited business profile and appropriate enterprise risk management (ERM).
The revised outlook to negative reflects important measures of balance sheet strength over the past five years that compare unfavorably with the Ag Workers peer group with a similar long-term balance sheet strength ICR rating. Such measures include (but are not necessarily limited to) policyholder surplus growth, underwriting leverage and loss reserve development trends.
These adverse rating characteristics are further exacerbated by a deterioration in the company’s risk-adjusted capitalization from the prior year, mainly caused by a decline in policyholder surplus due to mounting underwriting losses. Furthermore, the payment structure of policyholder dividends has had a suppressive effect on policyholder surplus growth over the longer term.
Ag Workers’ adequate business performance is assessed using pre-dividend policyholder results, for which underwriting performance is in line with the industry’s composite benchmarks. However, the policyholders’ dividend payment structure limits overall insurance performance and negatively impacts pre-tax returns on income and equity. Ag Workers’ limited assessment of the company profile is driven largely by its product focus which is geographically concentrated in Texas, exposing its results to frequent and severe weather-related events, as well as potential legal, economic, competitive and regulatory challenges. AM Best assesses Ag Workers’ ERM appropriately as its risk management capabilities are appropriately matched to the complexity of the business and match the business’s risk profile.
This press release relates to Credit Ratings published on AM Best’s website. For all rating information related to the release and relevant disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, see AM Best’s Recent Review Activity webpage. For more information about the uses and limitations of credit rating advice, see Best . Credit Rating Guide† 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, see Guide to the correct use of Best .’s ratings and reviews†
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. The company is headquartered in the United States and does business in more than 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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