AM Best has revised the outlook to negative from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating of A (Excellent) and the Long-Term ICR of “a+” (Excellent) of Federated Rural Electric Insurance Exchange (Federated) (Shawnee, KS). The outlook of the FSR is stable.

The Credit Ratings (ratings) reflect Federated’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.

The negative outlook on the Long-Term ICR reflects pressure on Federated’s operating performance, driven by deterioration in underwriting results in recent years, resulting from increased property and auto physical damage losses that stem from weather and inflationary pressures. While management has taken actions to stabilize results, the ultimate effectiveness in returning performance to historical norms is uncertain. A continuation of adverse operating results could prompt a lowering of the operating performance assessment.

Despite the deterioration in operating performance, Federated’s balance sheet strength remains at the very strong level, based on risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Additional factors include modest underwriting leverage, solid liquidity and cash flow measures, favorable loss reserve development, a conservative investment portfolio and a diversified panel of highly rated reinsurance partners.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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