CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - OCTOBER 08, 2013 12:00 AM (EDT)
A.M. Best Co. has upgraded the financial strength rating to A- (Excellent) from B++ (Good) and issuer credit rating to “a-” from “bbb+” of Farmers Mutual Fire Insurance Company of Marble, Pennsylvania (Farmers Mutual) (Marble, PA). The outlook for both ratings is stable.
The positive rating actions reflect Farmers Mutual’s strong risk-adjusted capitalization, historical pattern of surplus growth and consistently favorable net income earnings driven by a conservative underwriting philosophy and its steady stream of net investment income. Farmers Mutual adheres to strict underwriting guidelines that have resulted in favorable loss ratios and positive net underwriting income over the last five years. In addition, Farmers Mutual maintains moderate underwriting leverage measures and continues to report favorable reserves development on both an accident and calendar year basis. Furthermore, Farmers Mutual maintains long-standing agency relationships and local market knowledge and expertise in providing personal line coverages in Pennsylvania.
These positive rating factors are partially offset by Farmers Mutual’s geographic concentration of risk. As a single state property writer in Pennsylvania, Farmers Mutual’s results are exposed to frequent and severe weather-related events as well as regulatory, judicial and economic concerns. However, Farmers Mutual maintains an adequate reinsurance program to partially mitigate this risk. In addition, Farmers Mutual’s common stock investment leverage ratio is elevated, which exposes its policyholders’ surplus to stock market volatility. Moreover, this risk is partially alleviated, as the company’s common stock investment portfolio is comprised mainly of blue chip dividend paying companies.
Negative rating pressure may occur if Farmers Mutual’s operating performance deteriorates and/or there is a significant decline in its overall risk-adjusted capital strength as measured by Best’s Capital Adequacy Ratio (BCAR). Any future positive rating actions are contingent upon the continuation of Farmers Mutual’s solid operating performance, surplus growth and improved business profile while maintaining strong capitalization and moderate underwriting leverages.
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.
A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source.