AM Best has downgraded the Financial Strength Rating (FSR) to A- (Excellent) from A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) to “a-” (Excellent) from “a” (Excellent) of Farm Bureau County Mutual Insurance Company of Texas and Texas Farm Bureau Casualty Insurance Company (together known as Texas Farm Bureau Casualty Group). The outlook of these Credit Ratings (ratings) is negative. At the same time, AM Best has removed from under review with negative implications and affirmed the FSR of A- (Excellent) and the Long-Term ICRs of “a-” (Excellent) of Texas Farm Bureau Mutual Insurance Company and Texas Farm Bureau Underwriters (together known as Texas Farm Bureau Mutual Group). The outlook assigned to these ratings is negative. All companies are domiciled in Waco, TX, and are collectively referred to as Texas Farm Bureau Insurance Group (the group).

The ratings reflect Texas Farm Bureau Insurance Group’s balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management.

Following a year of material surplus deterioration, the group implemented a pooling agreement between its property affiliates (Texas Farm Bureau Mutual Insurance Company) and the casualty operations (Texas Farm Bureau Casualty Insurance Company), consisting primarily of personal auto, effective Jan. 1, 2024, which will allow the group to manage capital more effectively. Under the pooling agreement, premiums, losses and expenses are combined and pro-rated, with participation percentages based on the individual members’ policyholder surplus.

The group’s balance sheet strength assessment of very strong reflects of its very strong overall risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), as well as moderate levels of leverage, adequate liquidity, favorable calendar-year reserve development and a comprehensive reinsurance program.

The group’s marginal operating performance assessment reflects the most-recent three consecutive years of operating losses and a high degree of volatility. As a result, most of the key profitability metrics fall short of the private passenger standard auto and homeowner composite. Like most of its peers, net underwriting losses were driven by the extraordinary weather-related events in 2023. These weather-related events resulted in 13 catastrophe losses, as classified by the group, four of which exceeded its occurrence catastrophe retention level. Further driving elevated losses is the impact of increased loss cost trends across the group’s core lines of business.

Texas Farm Bureau Insurance Group’s business profile is neutral, supported by the group's market penetration as a leading personal lines writer in Texas, along with their broad product offering. In addition, the assessment takes into account the group’s relationship with the Texas Farm Bureau, which enhances customer loyalty and affinity.

In response to these adverse trends, management has put in place a series of initiatives to return to profitability and improve balance sheet strength metrics, including significant rate increases, increased segmentation on the auto line of business and more-refined underwriting guidelines. However, the negative outlooks reflect the uncertainty and execution risks associated with these efforts. Should key balance sheet or operating performance metrics not stabilize as a result of these actions, the ratings may be downgraded.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. 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, please view Guide to Proper Use of Best’s Ratings & Assessments.

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