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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - OCTOBER 24, 2011 12:00 AM (EDT)
A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating of A (Excellent) and issuer credit rating of "a" of Farmers Mutual of Tennessee (Farmers of Tennessee) (Knoxville, TN).
The revised outlook of Farmers of Tennessee reflects its poor underwriting performance in recent years and limited business profile, which are not reflective of its current rating level. Farmers of Tennessee maintains a single state geographic concentration, which exposes earnings and surplus to localized weather events. This was evident in recent years, as severe storms generated significant claims and gross losses. Nevertheless, the company's sound reinsurance program mitigated much of these losses. In addition, Farmers of Tennessee has experienced an increase in fire claims, which further dampened its underwriting performance.
However, Farmers of Tennessee has strong risk-adjusted capitalization that is derived from its conservative underwriting leverage. Furthermore, Farmers of Tennessee retains excellent liquidity measures and has a long standing local market presence.
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"; "Catastrophe Analysis in A.M. Best Ratings"; "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.