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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - JANUARY 18, 2012 12:00 AM (EST)
A.M. Best Co. has assigned a financial strength rating (FSR) of B++ (Good) and issuer credit rating (ICR) of "bbb+" to Farmers and Mechanics Fire and Casualty Ins Co (FMF&C). The outlook assigned to both ratings is stable.
Concurrently, A.M. Best has affirmed the FSR of A- (Excellent) and the ICR of "a-" of Farmers and Mechanics Mutual Insurance Company of West Virginia (the Mutual). The outlook for both ratings is stable. All companies are domiciled in Martinsburg, WV.
The ratings are based on FMF&C's adequate risk-adjusted capitalization, historical trend of consistent underwriting income and leadership by the Mutual.
The company is a wholly owned stock subsidiary of the Mutual, and currently writes personal automobile and liability coverages only in West Virginia. In addition, the Mutual provides sales, underwriting, claims, accounting, data processing, administrative and investment services to FMF&C. FMF&C was funded in August 2006 with an initial $2.5 million stock investment from the Mutual to support the group's expansion into automobile, artisans liability and umbrella coverages.
The ratings consider the usual challenges experienced by a start-up company over its first few years in business. The execution risk associated with building a profitable portfolio of business is significant given current competitive market conditions in West Virginia. Considering FMF&C's relatively small capital base, any changes within the business plan could expose its capitalization or operating performance to additional volatility. As a single-state writer focused only on a few lines of business, FMF&C's business profile is relatively narrow.
The ratings and outlook of FMF&C could be downgraded if there is any material deviation in the company's business plan, which could strain its capitalization. As such, A.M. Best will continue to closely monitor FMF&C's premium growth and profitability.
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"; and "Rating Members of Insurance Groups." 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.