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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - JUNE 07, 2011 12:00 AM (EDT)
A.M. Best Co. has revised the outlook to positive from stable and affirmed the financial strength rating of B++ (Good) of Farmers Mutual Fire Insurance Company of Salem County (Farmers of Salem) (Salem, NJ). In addition, A.M. Best has upgraded the issuer credit to "bbb+" from "bbb" and revised the outlook on this rating to positive from stable.
The positive rating actions reflect Farmers of Salem's strong operating earnings and solid risk-adjusted capitalization. The ratings also recognize Farmers of Salem's prudent catastrophe management initiatives and local market expertise. These positive rating factors are reflective of management's conservative underwriting strategy, which has resulted in strong surplus growth.
Partially offsetting these positive rating factors is Farmers of Salem's property concentration in New Jersey. Although the company maintains predominantly a single-state geographic concentration, exposure is spread out throughout the state. However, a single state geographic concentration exposes earnings to catastrophic losses as well as market and regulatory concerns.
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"; "Equity Credit for Hybrid Securities"; "A.M. Best's Ratings & the Treatment of Debt"; "Natural Catastrophe Stress Test Methodology"; 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.