A.M. Best Co. has upgraded the financial strength rating to
A-(Excellent) from B++ (Good) and issuer credit rating to “a-“ from
“bbb+” of Farmers Mutual Insurance Company (Farmers)
(Whitehall, WV). The outlook for both ratings has been revised to stable
The rating actions are based on Farmers’ adequate level of
capitalization driven primarily by its low underwriting leverage,
several years of profitable operating results and a long-standing local
market presence in its single state of operation. These positive rating
factors are attributed to the company’s focus on profitability within in
its business niche and its long-term agency relationships. Over the past
several years, the company reported above average operating income as a
result of its favorable underwriting results and a steady flow of
investment income. Through periods of competitive market conditions,
management has maintained its underwriting and pricing discipline. The
ratings further reflect the expectation that Farmers will continue to
strengthen its risk-adjusted capitalization and out-perform the
operating results of the composite average.
As a property predominant writer with a geographic concentration in West
Virginia, Farmers’ earnings remain susceptible to localized and severe
weather-related events as well as changes in the regulatory environment
and competitive market conditions. Additional offsetting rating factors
include the company’s elevated expense position, mainly due to its
profit sharing plan and technological upgrades.
However, these factors are partially mitigated by Farmers’ five-year
average pure loss ratio that outperforms the composite.
Factors that could trigger negative rating actions include excessive
premium growth or significant deterioration in Farmers’ operating
performance that may cause a material decline in its risk-adjusted
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: “Risk
Management and the Rating Process for Insurance Companies”; “Catastrophe
Analysis in A.M. Best Ratings”; and “Understanding BCAR for
Property/Casualty Insurers.” 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.
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