AM Best has changed the outlook for the Oklahoma Farm Bureau Group from stable to negative. This decision affects the Long-Term Issuer Credit Rating (ICR) for the group, which includes Oklahoma Farm Bureau Mutual Insurance Company and its subsidiary, AgSecurity Insurance Company. Both companies are based in Oklahoma City, Oklahoma. While their Financial Strength Rating (FSR) remains at B++ (Good), the outlook for this rating is stable.
The change in outlook is due to concerns about the group’s operating performance. Oklahoma Farm Bureau has faced several years of underwriting losses, largely caused by severe weather, inflation, and rising reinsurance costs. As a result, their operating performance metrics are not measuring up to those of other companies in the same rating category.
Management is aware of these challenges and is taking steps to improve the situation. They have implemented rate increases and reunderwriting initiatives, but it is still unclear how effective these measures will be in reversing the trend.
On a positive note, Oklahoma Farm Bureau’s balance sheet strength is rated as very strong. This strength comes from a solid level of risk-adjusted capitalization, a cautious investment portfolio, low reserve leverage, and a history of favorable reserve development.
However, the group does face risks due to its limited business profile. As a single-state writer in Oklahoma, it is especially vulnerable to weather events and regulatory changes. Despite these risks, Oklahoma Farm Bureau is the largest domestic insurance provider in the state and holds a significant share of the farm and ranch insurance market.
The group’s enterprise risk management (ERM) is deemed appropriate for its risk profile. They have a formal ERM program and a comprehensive reinsurance strategy that helps manage their exposure to potential losses.
In summary, while Oklahoma Farm Bureau has a strong balance sheet and is a key player in Oklahoma’s insurance market, it must address ongoing operational challenges to maintain its ratings and stability.