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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - APRIL 27, 2011 12:00 AM (EDT)
A.M. Best Co. has revised the outlook to stable from positive and affirmed the financial strength rating of A (Excellent) and issuer credit rating of "a+" of Farmers Mutual Insurance Company of Nebraska (Farmers of Nebraska) (Lincoln, NE).
Farmers of Nebraska's ratings reflect its excellent risk-adjusted capitalization, solid liquidity position and long-standing market presence as a major farmowners' insurance writer in Nebraska. These positive rating factors are offset by the company's geographic concentration of risk in the Midwest and exposure to localized storm losses since 85% of its business is concentrated in Nebraska.
Farmers of Nebraska has experienced a significant increase in the frequency and severity of wind and hail storm losses in the past three years. The revised outlook reflects A.M. Best's prospective viewpoint that Farmers of Nebraska's pre-tax operating returns and underwriting results over the next several years likely will lag the industry (if the recent weather patterns continue) especially since the company has a concentration of property business in Nebraska and South Dakota. Although management has undertaken corrective actions to improve underwriting performance, the inherent risk associated with a geographic concentration in the Midwest coupled with competitive market conditions may continue to strain profitability over the near term.
The principal methodology used in determining these ratings is Best's Credit Rating Methodology - Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best's rating process and highlights the different rating criteria employed. Additional key criteria utilized include: "Risk Management and the Rating Process for Insurance Companies"; "Understanding BCAR for Property/Casualty Insurers"; "Natural Catastrophe Stress Test Methodology"; "Catastrophe Analysis in A.M. Best Ratings"; and
"Catastrophe Risk Management Incorporated Within the Rating Analysis." Methodologies 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.