FLORIDA FARM BUREAU GROUP Florida Farm Bureau FARM BUREAU GROUP ... FLORIDA FARM BUREAU GROUP Florida Farm Bureau Casualty A ... 5.1 2015 BY-LINE BUSINESS ($000) Reinsurance Reinsurance

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<ul><li><p>Associated With: Southern Casualty Holding Company</p><p>FLORIDA FARM BUREAU GROUP5700 Southwest 34th Street, Gainesville, FL 32608-5330</p><p>Mailing Address: P.O. Box 147030, Gainesville, FL 32614-7030Web: www.floridafarmbureau.com</p><p>Tel: 352-378-8100 Fax: 352-374-1514AMB#: 003946Associated Ultimate Parent#: 046019</p><p>RATING RATIONALE</p><p>Rating Rationale: The ratings and outlooks reflect Florida Farm BureauGroups strong risk-adjusted capitalization, favorable operating earnings andextensive knowledge of the Florida marketplace. The ratings alsoacknowledge the commitment and support received from its parent, SouthernFarm Bureau Casualty Insurance Company, which is a leading personal linesinsurance organization and markets a full complement of insurance products.</p><p>These positive rating attributes are offset by the groups exposure tocatastrophic loss accumulation, as well as market, legislative and regulatoryconcerns due to its business concentration in Florida.</p><p>The groups positive rating factors are derived from managementsconservative operating strategies, as evidenced by its high-quality investmentportfolio, which has been the main driver of surplus appreciation during thelatest five-year period. Net investment income coupled with other income hasbeen sufficient to offset underwriting losses that occurred prior to 2012. Sincethen, Florida Farm Bureau has produced pre-tax operating gains and positivenet income in each of the last four years, along with improved risk-adjustedcapitalization. The groups five-year average pre-tax returns on revenue andequity compare favorably to the private passenger standard auto andhomeowners composite. Underwriting results, though generally negative inearlier years, have been positive in the last four years. Combined with solid,though fluctuating net investment income (due to a historically low interestrate environment), the group has produced consistent pre-tax operatingearnings over the past five years. The ratings also recognize the groupsdisciplined business growth and efficiencies realized through automationinitiatives. In addition, the group maintains a sustainable competitive</p><p>Printed August 18, 2016 www.ambest.com Page 1 of 9</p><p>FLORIDA FARM BUREAU GROUPFlorida Farm Bureau Casualty AFlorida Farm Bureau General A</p></li><li><p>advantage due to its extensive local market knowledge and low-cost structure,both of which are fostered by its exclusive agency network. Further, the groupbenefits from its sponsorship by the Florida Farm Bureau Federation, whichenhances customer loyalty and affinity.</p><p>Partially offsetting these positive factors is the groups geographicconcentration as a Florida property writer, which exposes it to potentialcatastrophic loss accumulation from hurricanes, and product concentration inthe auto book of business, which has historically produced volatile results. Inrecent years, no major hurricane has made landfall but underwriting resultswere somewhat inconsistent prior to 2012 due to sinkhole losses. Managementhas implemented several corrective initiatives to mitigate such losses, whichinclude significant rate increases and reducing exposures in the main countieswhere most sinkhole losses originate, an approach that has been vindicated bylower sinkhole claims and positive underwriting results since 2012. The groupmaintains a comprehensive reinsurance program, integrated with coveragefrom the Florida Hurricane Catastrophe Fund, designed to minimize surplusloss from both frequent and severe hurricanes. While the gross probablemaximum loss (PML) from a 100-year hurricane event remains high relativeto surplus, the net impact to surplus from such an event has been reduced to amanageable level. The ratings are based on the consolidation of Florida FarmBureau Casualty Insurance Company and its fully reinsured subsidiary.</p><p>Negative rating pressure could occur with a material decline in overallrisk-adjusted capitalization. Negative rating pressure could also occur with anegative trend in operating results or as a result of regulatory or legislativedecisions as seen with the mandatory rate rollback in prior years. Negativerating pressure could occur in the event of a material withdrawal of supportfrom the parent. Positive rating action could occur with a continuation offavorable operating results.</p><p>RATING UNIT MEMBERSFlorida Farm Bureau Group (AMB# 003946):</p><p>AMB# COMPANYBESTSFSR</p><p>003590 Florida Farm Bureau Casualty A011337 Florida Farm Bureau General A</p><p>KEY FINANCIAL INDICATORS ($000)Statutory Data</p><p>PeriodEnding</p><p>DirectPremiumsWritten</p><p>NetPremiumsWritten</p><p>Pre-taxOperating</p><p>IncomeNet</p><p>Income</p><p>TotalAdmitted</p><p>Assets</p><p>Policy-holdersSurplus</p><p>2011 284,013 216,988 10,520 9,187 444,169 212,3432012 296,781 226,332 19,803 14,943 474,063 227,5452013 308,592 235,518 23,184 20,117 502,836 246,2702014 307,019 237,255 31,099 24,845 532,233 268,9792015 302,323 238,577 27,633 21,610 554,446 292,326</p><p>Profitability Leverage Liquidity</p><p>PeriodEnding</p><p>Comb.Ratio</p><p>Inv.Yield(%)</p><p>Pre-taxROR(%)</p><p>NAInvLev</p><p>NPWto</p><p>PHSNetLev.</p><p>OverallLiq.(%)</p><p>Oper.Cash</p><p>flow (%)2011 101.3 3.6 5.1 5.5 1.0 2.1 191.6 106.32012 97.4 3.1 8.9 2.9 1.0 2.1 192.3 111.82013 95.8 2.8 10.0 2.6 1.0 2.0 196.0 114.52014 93.3 2.8 13.0 2.5 0.9 1.9 202.2 113.62015 94.7 2.7 11.5 2.3 0.8 1.7 211.5 111.7</p><p>5-Yr 96.4 3.0 9.8 </p><p>(*) Within several financial tables of this report, this company is compared against the PrivatePassenger Standard Auto &amp; Homeowners Composite.</p><p>(*) Data reflected within all tables of this report has been compiled through the A.M. BestConsolidation of statutory filings.</p><p>BUSINESS PROFILE</p><p>The Florida Farm Bureau Group consists of two domestic property andcasualty insurance companies, Florida Farm Bureau Casualty InsuranceCompany (FFB Casualty) and its wholly owned subsidiary, Florida FarmBureau General Insurance Company (FFB General). The group specializes inwriting private passenger automobile, homeowners, dwelling fire, farm andbusiness owners lines of insurance for members of the Florida Farm BureauFederation. The groups target market remains preferred personal lines, withsome associated commercial exposures. The group ranks as one of the marketleaders for private passenger automobile and homeowners insurance businessin Florida.</p><p>The group offers three major package policies in addition to homeowners:1) a country squire policy (fire and inland marine coverage on farm personalproperty, farm comprehensive personal liability, and an endorsement to ahomeowners and dwelling package policy); 2) a dwelling package policy; and3) a commercial lines package policy. Business is marketed and serviced by anetwork of over 200 exclusive agents located in each county of Florida. Onlymembers of the federation are eligible for insurance coverages. The group alsoparticipates in several reinsurance pools with various farm bureau companiesas well as the Automobile Joint Underwriting Association.</p><p>All farm bureau property and casualty business written in Florida isultimately reflected in the financial statements of FFB Casualty. Since 1993,FFB Casualty reinsures all of the business written by FFB General, which wasthe successor to the Florida Farm Bureau Mutual Insurance Company (FFBMutual).</p><p>Printed August 18, 2016 www.ambest.com Page 2 of 9</p></li><li><p>TOTAL PREMIUM COMPOSITION &amp; GROWTH ANALYSIS</p><p>PeriodEnding</p><p>DPWReinsurance</p><p>Prem AssumedReinsurance</p><p>Prem Ceded($000) (% Chg) ($000) (% Chg) ($000) (% Chg)</p><p>2011 284,013 5.9 919 38.9 67,944 -6.62012 296,781 4.5 863 -6.1 71,312 5.02013 308,592 4.0 522 -39.4 73,597 3.22014 307,019 -0.5 455 -12.9 70,218 -4.62015 302,323 -1.5 407 -10.5 64,153 -8.6</p><p>5-Yr CAGR 2.4 -9.3 -2.5</p><p>PeriodEnding</p><p>NPW NPE($000) (% Chg) ($000) (% Chg)</p><p>2011 216,988 10.6 208,226 10.72012 226,332 4.3 221,786 6.52013 235,518 4.1 232,721 4.92014 237,255 0.7 238,905 2.72015 238,577 0.6 240,933 0.8</p><p>5-Yr CAGR 4.0 5.1</p><p>2015 BY-LINE BUSINESS ($000)Reinsurance Reinsurance</p><p>DPW Prem Assumed Prem CededProduct Line ($000) (%) ($000) (%) ($000) (%)Priv Pass Auto Liab 100,345 33.2 748 1.2Homeowners 124,048 41.0 48,383 75.4Auto Physical 41,582 13.8 1,049 1.6Coml MultiPeril 11,300 3.7 3,500 5.5Comml Auto Liab 7,922 2.6 283 0.4Allied Lines 9,720 3.2 7,943 12.4All Other 7,406 2.4 407 100.0 2,248 3.5</p><p>Total 302,323 100.0 407 100.0 64,153 100.0</p><p>BusinessNPW Retention</p><p>Product Line ($000) (%) (%)Priv Pass Auto Liab 99,597 41.7 99.3Homeowners 75,664 31.7 61.0Auto Physical 40,533 17.0 97.5Coml MultiPeril 7,801 3.3 69.0Comml Auto Liab 7,639 3.2 96.4Allied Lines 1,777 0.7 18.3All Other 5,566 2.3 71.2</p><p>Total 238,577 100.0 78.8</p><p>BY-LINE RESERVES ($000)Product Line 2015 2014 2013 2012 2011Priv Pass Auto Liab 72,559 68,688 67,730 59,851 57,887Homeowners 16,028 16,876 17,364 18,164 20,856Auto Physical 3,149 2,815 2,316 2,338 1,908Coml MultiPeril 5,261 6,336 6,804 6,493 4,563Comml Auto Liab 5,484 5,233 4,121 3,868 4,091Allied Lines 116 59 318 390 87All Other 5,069 5,054 5,828 4,920 4,979</p><p>Total 107,664 105,062 104,481 96,024 94,370</p><p>GEOGRAPHIC BREAKDOWN BYDIRECT PREMIUM WRITINGS ($000)</p><p>2015 2014 2013 2012 2011Florida 302,323 307,019 308,592 296,781 284,013</p><p>Total 302,323 307,019 308,592 296,781 284,013</p><p>RISK MANAGEMENT</p><p>Florida Farm Bureau (FFB) is working on a formal written companywideERM framework compiling current and future efforts in risk areas. Currently,the group has an ERM program that has been in place for several years withimplemented risk controls and monitoring where applicable. The main focusof ERM is on the insurance and underwriting risk as the groups conservativeapproach regarding other decisions and risks minimizes their non-insuranceexposure. The company addresses pricing risk with annual rate reviews andfilings when necessary. Reserves are monitored quarterly and set consistentlyand slightly redundant to minimize risk from claims emergence or growth.Pricing and loss trends are monitored and projected for planning anddecision-making purposes. The Claims Department has a planned anddeliberate approach to managing catastrophe situations and their ProductsDepartment stays on top of the industry standards for forms and coverages.The Compliance and Government Relations Department is committed tokeeping FFB involved, and proactive, in all regulatory and legislative activitiesin the Florida state capital, Tallahassee. Several department heads and stafferssit on boards and advisory councils to stay involved in industry discussions onemerging topics, such as auto liability fraud and trends, trade group initiatives,and guaranty and residual market condition (and assessments).</p><p>Exposure Management applies company-directed thresholds (based on TIVand TVAR) to spread exposures and minimize concentrations forhurricane/tropical storm and also perils such as tornado, hail, and sinkhole.Wind/water litigation is explicitly mitigated by restricting coastal exposure.Daily, monthly, and quarterly reports track policy growth, TIV growth, losses,retention, close rates, and expenses by LOB, county, or agent, and exposuregrowth is targeted by county and spread within county for any location orsurrounding square mile. All property policies include an inflation adjustmentor re-evaluation on each renewal to ensure adequate Insurance to Value, andany excluded policy is monitored by UW on each renewal since managementconsiders good data quality essential to insurance operations, rating accuracy,minimize premium leakage, and to direct future product innovation.</p><p>Printed August 18, 2016 www.ambest.com Page 3 of 9</p></li><li><p>Reinsurance plays an important role in FFBs capital strategy and ismanaged closely. The stated goal is to survive a storm equivalent to a 250-yearProbable Maximum Loss (PML) in a single season with a loss to surpluswithin reasonable limits. FFB has implemented minimum rating thresholdsfor all reinsurers, and FFB approves the list of all reinsurers receiving theirsubmissions at each renewal. These thresholds were put in place to safeguardfast collections at the expected recovery level. The reinsurance program isrounded out beyond catastrophic risk using Surplus Share, Excess Casualty,Excess Umbrella, Terrorism, and Aggregate coverages.</p><p>In recent years, Assignment of Benefits (AOB) has impacted Florida FarmBureau Group. To mitigate this matter, the company contacts the insuredwithin 24 hours to determine if an AOB exists; in addition, they address AOBsthrough negotiation, mediation and appraisal rather than litigation, and theywork with the insured to ensure any additional/future repairs are completed inline with the companys scope of work. The company has plans on adjustingand making future form changes.</p><p>OPERATING PERFORMANCE</p><p>Operating Results: Florida Farm Bureau Group has historically generatedfavorable operating earnings particularly during years of low and moderatecatastrophe activity. The groups positive pre-tax operating income has beendriven by net investment income, improved underwriting results and feeincome. Although mild weather has continued in recent years, results weresomewhat dampened due to a state mandated rate rollback in earlier years andan increase in sinkhole claims that occurred through 2011. However, bothmilder weather patterns and a mitigation of the sinkhole claims in 2012, andmore significantly in 2013 and 2014, have helped Florida Farm Bureauachieve its fourth consecutive year of underwriting profits in five years. As aresult, the groups five year average pre-tax operating returns on revenue andequity compare favorably to the private passenger standard auto andhomeowners composite. Although net investment income fluctuated in thefive year period of 2011-2015, when combined with underwriting profitabilityand fee income, has resulted in favorable pre-tax operating earnings and netincome for five consecutive years. Additions to surplus have also beenreported in each of the last five years.</p><p>PROFITABILITY ANALYSIS ($000)Company</p><p>Pre-tax After-taxPeriod Operating Operating Net TotalEnding Income Income Income Return2011 10,520 8,609 9,187 8,4842012 19,803 14,935 14,943 15,1222013 23,184 19,627 20,117 19,4022014 31,099 25,048 24,845 26,2932015 27,633 21,694 21,610 21,963</p><p>5-Yr Total 112,239 89,913 90,703 91,265</p><p>Company Industry CompositePeriod Pre-tax Return Operating Pre-tax Return OperatingEnding ROR (%) on PHS (%) Ratio (%) ROR (%) on PHS (%) Ratio (%)2011 5.1 4.1 94.8 -2.2 0.0 102.32012 8.9 6.9 91.8 3.2 6.2 96.72013 10.0 8.2 90.7 7.0 10.0 92.52014 13.0 10.2 88.0 6.4 8.1 93.32015 11.5 7.8 89.3 5.9 4.1 93.9</p><p>5-Yr Avg 9.8 7.6 90.8 4.3 5.8 95.6</p><p>Underwriting Results: The groups underwriting results have performedfavorably for four consecutive years and lowered the combined ratio over thefive year period. As a single state writer in Florida, the groups underwritingresults are exposed to frequent and severe weather related events. Thehomeowners segment is the groups largest line of business, based on directpremium written with potential for significant volatility. The group maintainsa comprehensive reinsurance program, integrated with coverage from theFlorida Hurricane Catastrophe Fund, designed to consider both freq...</p></li></ul>

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