News Column

A.M. Best Revises Issuer Credit Ratings Outlook to Stable for North Carolina Farm Bureau Group’s Members

April 30, 2014



OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best has revised the outlook for the issuer credit ratings (ICR) to stable from negative and affirmed the financial strength rating (FSR) of A (Excellent) and the ICRs of ďa+Ē for the North Carolina Farm Bureau Group (North Carolina Farm Bureau) members, North Carolina Farm Bureau Mutual Insurance Company and Farm Bureau Insurance Company of N.C., Inc. The outlook for the FSR is stable. All companies are domiciled in Raleigh, NC.

The rating affirmations reflect North Carolina Farm Bureauís solid risk-adjusted capitalization and historically favorable operating earnings. The ratings also recognize the groupís strong risk management practices and market leadership position as an insurer of farm-related exposures in North Carolina. These positive rating factors are reflective of managementís disciplined underwriting approach and conservative investment strategy.

North Carolina Farm Bureauís ongoing risk management initiatives are reflected in its ratings and are designed to reduce catastrophe exposure and drive more consistent underwriting performance. Furthermore, North Carolina Farm Bureau maintains a cost-effective agency network, a long-standing local market presence, as well as derives benefits from the sponsorship provided by the North Carolina Farm Bureau Federation, which facilitates marketing and government relations efforts as well as enhances customer loyalty and affinity.

Partially offsetting these positive rating factors are North Carolina Farm Bureauís geographic concentration of risk, which exposes it to weather-related events, as well as risks from changes in the economic, judicial and regulatory environments. The groupís exposure to weather-related events was evident in 2011 when above-average claims caused by wind, hail, tornadoes and Hurricane Irene resulted in a significant underwriting loss and a surplus decline of over 20%. Prior to 2011, North Carolina Farm Bureauís underwriting performance had been better than the composite average.

The revision of the ICRs outlook to stable reflects North Carolina Farm Bureauís stronger surplus position and improved risk-adjusted capitalization and operating performance in 2012 and in 2013. While this is partly due to relatively milder weather patterns during this period, it also reflects North Carolina Farm Bureauís emphasis on reducing underwriting losses through enhanced pricing and better risk selection. The outlook further considers North Carolina Farm Bureauís efforts in recent years to mitigate its exposure to catastrophic weather related losses through a steady reduction in risk exposures in coastal and/or concentrated areas and through additional reinsurance protection.

Factors that could result in negative rating actions include a renewed deterioration in North Carolina Farm Bureauís operating performance and/or erosion of its capital base. Factors that could result in further improvement in the ratings and/or a positive outlook are continued sustained improvement in the groupís underwriting and operating performance while maintaining strong risk-adjusted capitalization.

The methodology used in determining these ratings is Bestís Credit Rating Methodology, which provides a comprehensive explanation of A.M. Bestís rating process and contains the different rating criteria employed in the rating process. Bestís Credit Rating Methodology can be found at www.ambest.com/ratings/methodology. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2014 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.



A.M. Best

Neil Das Gupta, 908-439-2200, ext. 5206

Financial Analyst

neil.dasgupta@ambest.com

or

Joseph A. Burtone

Assistant Vice President, 908-439-2200, ext. 5125

joseph.burtone@ambest.com

or

Rachelle Morrow, 908-439-2200, ext. 5378

Senior Manager, Public Relations

rachelle.morrow@ambest.com

or

Jim Peavy, 908-439-2200, ext. 5644

Assistant Vice President, Public Relations

james.peavy@ambest.com

Source: A.M. Best


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