Best’s News & Research Service - March 18, 2020 04:06 PM (EDT)
AM Best Revises Issuer Credit Rating Outlook to Positive for The Farmers Fire Insurance Company
- March 18, 2020 04:06 PM (EDT)
Oldwick //BestWire// - AM Best has revised the outlook to positive from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term ICR of “bbb” of The Farmers Fire Insurance Company (Farmers) (York, PA). The outlook of the FSR remains stable.
The Credit Ratings (ratings) reflect Farmers’ balance sheet strength, which AM Best categorizes as very strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM).
The revision in the Long-Term ICR outlook to positive reflects improved operating performance in recent years driven by management’s underwriting initiatives that have stabilized results. Based on these actions, underwriting performance, as measured by the company’s five-year average combined ratio, has improved to a level that is comparable to the personal property composite. AM Best’s expectation is for sustained improvement in operating performance metrics with moderate volatility from weather-related events and equity market volatility while maintaining a very strong level of balance sheet strength.
Farmers’ balance sheet strength reflects the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), and its diversified investment portfolio, which has trended toward increased allocations in high quality fixed income securities to mitigate exposure to shifts in the equity market. The balance sheet further benefits from an effective reinsurance program with high quality reinsurers and moderate reinsurance dependence. These strengths are partially offset by modestly elevated underwriting leverage and historically unfavorable loss reserve trends that have improved in recent years, attributed to management’s reserve-strengthening efforts. The limited business profile reflects Farmers’ product and geographic spread that focuses on property business written solely in Pennsylvania. AM Best considers the ERM program to be appropriate for the company’s risk profile. The ERM process includes a risk-awareness culture embedded throughout the company with its board actively engaged.
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 media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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 New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.