A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit rating of “a+” of Rural Community Insurance Company (RCIC) (Anoka, MN). The outlook for both ratings is stable.
The ratings reflect RCIC’s superior capitalization, historically solid operating performance and the benefits derived from its leading presence within the multi-peril crop insurance (MPCI) industry. In addition, significant financial flexibility and operating liquidity is afforded through the company’s ultimate parent, Wells Fargo & Company [NYSE: WFC], one of the largest publicly-traded financial services organizations in the United States. The ratings also recognize the added balance sheet protection provided by an aggregate stop loss reinsurance treaty, which minimizes the potential impact from severe underwriting losses and management’s knowledge and expertise in the highly specialized MPCI marketplace. The effectiveness of RCIC’s strong underwriting culture and efficient use of reinsurance were demonstrated by its 2012 results, which, while not as strong as prior years’ results, were quite favorable in light of the severe drought conditions that year.
These positive rating factors are somewhat offset by RCIC’s rather narrow product mix and the potential for underwriting volatility due to operational risks from changes in the agricultural marketplace or government changes in either the agricultural crop insurance program or farm bill, which could run counter to RCIC's business plan. While RCIC does have a substantial reliance on reinsurance, concern with respect to that reliance is somewhat mitigated by the high credit quality of its reinsurers.
The stable outlook reflects A.M. Best’s expectation that strong underwriting and operating results will be sustained over the near term and capitalization will remain well supportive of RCIC’s ratings.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. Best’s 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 © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.