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TMCNet:  A.M. Best Removes From Under Review the Ratings of Colorado Farm Bureau Mutual Insurance Company

[February 08, 2013]

A.M. Best Removes From Under Review the Ratings of Colorado Farm Bureau Mutual Insurance Company

OLDWICK, N.J. --(Business Wire)--

A.M. Best Co. has removed from under review with negative implications and downgraded the issuer credit rating (ICR) to "bbb" from "bbb+" of Colorado Farm Bureau Mutual Insurance Company (Colorado Farm Bureau) (Centennial, CO). A.M. Best also has affirmed the financial strength rating (FSR) of B++ (Good) of Colorado Farm Bureau. The outlook assigned to both ratings is stable.

The affirmation of Colorado Farm Bureau's FSR reflects its favorable risk-adjusted capitalization, which is somewhat offset by its unfavorable operating performance trend due to weather-related losses in recent years. In 2012, Colorado Farm Bureau's underwriting results were negatively impacted by significant wildfire and tornado/hail events. These events, coupled with a moderate reduction in Colorado Farm Bureau's surplus position, were the main drivers in the downgrading of its ICR. However, the company's net underwriting leverage remains moderate, and its risk-adjusted capitalization is still well supportive of its current rating level. If this negative operating and capitalization trend were to ontinue in 2013, it may place additional pressure on the current ratings.

Colorado Farm Bureau has been in the process of merging with three other farm bureau mutual entities since early 2011: Farm Bureau Mutual Insurance Company of Arkansas, Inc., Louisiana Farm Bureau Mutual Insurance Company and South Carolina Farm Bureau Mutual Insurance Company.

While the merger is expected to result in an entity with a significantly greater premium and capital base, along with a wider geographic spread, the removal of the under review status of Colorado Farm Bureau is due to its current circumstances. The company's ratings are not expected to be significantly impacted by the completion of the merger process itself. Pending regulatory and policyholder approvals, the transaction is expected to be completed by year-end 2013.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: "Understanding BCAR for Property/Casualty Insurers"; "Risk Management and the Rating Process for Insurance Companies"; and "Catastrophe Analysis in A.M. Best Ratings." Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, 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 © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.


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