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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - OCTOBER 12, 2012 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) and issuer crediting rating of “bbb+” of Farmers Mutual Fire of Marble Pennsylvania (Farmers Mutual) (Marble, PA).
The positive rating actions reflect Farmers Mutual’s good risk-adjusted capitalization, historical pattern of surplus growth and consistently favorable earnings driven by a conservative underwriting philosophy, and its positive net investment income. The company has reported positive pre-tax operating gains in each of the last five years due to similar results in net underwriting and investment income, strict underwriting guidelines and a steady stream of investment income. Furthermore, Farmers Mutual maintains moderate underwriting leverage measures and continues to report favorable reserves development on both an accident and calendar year basis.
Partially offsetting these positive rating factors is Farmers Mutual’s geographic concentration in Pennsylvania. As a single state property writer, the company is exposed to frequent and severe weather-related events as well as regulatory, judicial and economic concerns. In addition, Farmers Mutual’s common stock investment leverage ratio is elevated, which exposes the policyholder’s surplus to stock market volatility. However, this risk is partially alleviated as the common stock investment portfolio is comprised mainly of blue chip dividend paying companies.
In the future, A.M. Best may upgrade Farmers Mutual’s ratings if its favorable underwriting and earnings trends continue and surplus appreciates. However, the positive outlook may be revised if there is a deterioration in the company’s underwriting and earnings, coupled with surplus depreciation.
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. Key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; and “Rating Members of Insurance Groups.” Best’s Credit Rating Methodology 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.