OLDWICK, N.J.--(BUSINESS WIRE)--
A.M. Besthas downgraded the financial strength rating to C++
(Marginal) from B (Fair) and the issuer credit ratings to ďbĒ from ďbbĒ
of RVOS Farm Mutual Insurance Groupís (RVOS Group) members: RVOS
Farm Mutual Insurance Company and Priority One Insurance Company.
The outlook for all ratings remains negative. All companies are
domiciled in Temple, TX.
The rating downgrades reflect the continued deterioration in RVOS
Groupís risk-adjusted capitalization and operating performance, due
primarily to increased underwriting losses in recent years. As a
single-state property writer in Texas, RVOS Groupís underwriting
performance has been susceptible to frequent and severe weather-related
events along with risk of fire-related losses. This was evidenced over
the past five years by sizable underwriting losses, which have continued
into the first half of 2014. Through the first six months of 2014, the
group has been impacted by seven weather-related events totaling nearly
$12 million in gross and net losses. The ratings also reflect RVOS
Groupís elevated underwriting measures, which are primarily due to its
historically volatile policyholdersí surplus levels, while net premiums
written continues to increase mainly as a result of rate increases.
RVOS Groupís management has on-going initiatives to improve its overall
financial results. The underwriting corrective actions include
aggressive rate increases, stricter underwriting guidelines, frequent
inspections, expense reductions, reviews of geographic concentrations
and new technology initiatives with deeper pricing segmentation. In
addition, RVOS Groupís other income and net investment income have been
positive and continue to partially offset its unfavorable underwriting
performance. RVOS Group benefits from its long-standing market presence
and strong agency relationships.
A.M. Best has maintained the negative outlook on the ratings. The
ratings may be downgraded further if RVOS Group has a continuation of
adverse operating results and declining risk-adjusted capitalization.
Removal of the negative outlook is contingent upon RVOS Groupís ability
to reverse its adverse operating performance and improve its overall
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
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Source: A.M. Best Company