FMNE Insurance outlook raised to stable as capital and earnings improve

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FMNE Insurance outlook stable

Highlights

AM Best revises FMNE Insurance's outlook to stable from negative on its Long-Term Issuer Credit Rating, affirming Financial Strength Rating of A and 'a+' credit rating.
Policyholder surplus rises significantly in 2024 due to $100 million 9% surplus note issuance and positive earnings, with further increases expected through Q1 2026.
Operating performance improves in 2023 and Q1 2026, supported by rate hikes, tighter underwriting, higher deductibles, exposure reductions, and a strong reinsurance program.

Rating action reflects stronger capital position

As reported by AM Best, the agency revises the outlook to stable from negative for FMNE Insurance Company’s Long-Term Issuer Credit Rating and affirms its Financial Strength Rating of A and Long-Term Issuer Credit Rating of "a+". The outlook on the Financial Strength Rating remains stable, and AM Best also revises to stable from negative the outlook on the insurer’s "a-" Long-Term Issue Credit Rating for its $100 million 9% surplus notes due 2044, while affirming that rating.

AM Best says the ratings reflect FMNE’s balance sheet strength, which it assesses as strongest, along with adequate operating performance, a neutral business profile and appropriate enterprise risk management. The agency says the outlook revision follows meaningful improvement in policyholder surplus in recent years after deterioration in 2022, and to a lesser extent in 2023, mainly because of weather-related losses.

The agency says the substantial rise in surplus during 2024 is mainly driven by the issuance of the $100 million surplus note and positive earnings. It adds that the sizable increase in 2025 and the first quarter of 2026 is driven primarily by positive earnings and, to a lesser degree, capital gains, with that favorable trend expected to continue because of profitability initiatives introduced by management in recent years.

Operational discipline supports Midwest market position

AM Best says FMNE’s strongest balance sheet assessment is supported by risk-adjusted capitalization at the strongest level under Best’s Capital Adequacy Ratio, as well as favorable liquidity and generally consistent loss reserve development. It also says underwriting leverage and reinsurance dependence compare favorably with private passenger standard auto and homeowners composite averages.

The agency describes operating performance as adequate and says underwriting discipline continues to support results. After weather-related events weakened results in 2022, operating performance begins improving in 2023 and continues through the first quarter of 2026, helped by rate increases, tighter underwriting guidelines, higher mandatory wind and hail deductibles, a reduction in high-exposure areas and systems transformation.

FMNE remains focused on personal lines in its core states of Nebraska and South Dakota, where AM Best says it holds a market-leading position. The agency notes that the insurer’s property and geographic concentration leaves it exposed to weather-related events, but says a comprehensive reinsurance program and board-governed risk management framework help mitigate those risks and support preservation of policyholder surplus.

Our earlier report on The Methodist Hospitals’ rating action explained that its credit outlook was revised to stable from negative as stronger supplemental Medicaid DSH funding supported a gradual financial recovery. We noted that the rating balance relied on low debt and supportive liquidity, but that operating performance remained uneven and sensitive to the hospital’s government-heavy payor mix, with stability hinging on improving margins and preserving liquidity.

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