Best’s News & Research Service - November 25, 2014 11:32 AM (EST)
A.M. Best Revises Issuer Credit Rating Outlook to Positive for Farmers Union Mutual Insurance Company
Oldwick //BestWire// - A.M. Best has revised the outlook to positive from stable and affirmed the issuer credit rating (ICR) of "a" for Farmers Union Mutual Insurance Company (FUMI) (Jamestown, ND). Concurrently, A.M. Best has also affirmed FUMI's financial strength rating of A (Excellent). The outlook for the FSR remains stable.
The revised outlook to positive for the ICR is a reflection of FUMI's consistently favorable operating results, consistent surplus appreciation and favorable reserve development. Profitability is driven by favorable underwriting results and positive net investment income that has been reported for five consecutive years and continued in 2014. Management continuously sets forth initiatives to maintain profitability including higher deductibles, rate increases, technological advancements, and the re-underwriting of the property book. Risk-adjusted capitalization is solid and well supportive of the current ratings. In addition, loss reserves are repeatedly redundant on both and accident- and calendar-year basis.
Partially offsetting these positive factors are the company's geographic concentration in North Dakota and property-predominant focus. The company's single-state concentration and focus on property business leaves surplus susceptible to adverse weather conditions, as well as changes with competitors and in the judicial and legislative environment.
Future positive rating action is contingent upon FUMI's ability to sustain its current levels of operating profitability while maintaining solid overall risk-adjusted capitalization and underwriting leverage measures. Negative rating action may follow a sudden, unexpected, and material decline in risk-adjusted capitalization or a sustained deterioration in operating performance.
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. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
- Understanding BCAR for Property/Casualty Insurers
- Catastrophe Analysis in A.M. Best Ratings
- Risk Management and the Rating Process for Insurance Companies
This press release relates to rating(s) that have been published on A.M. 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 visit A.M. Best's Ratings & Criteria Center.
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