OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has affirmed the financial strength ratings (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a” of the members of the Farmers Insurance Group (Farmers) and Farmers Reinsurance Company. Concurrently, A.M. Best has affirmed the ICR of “a” of Farmers’ management company and attorney-in-fact, Farmers Group Inc. (FGI) as well as the debt ratings on the outstanding surplus notes of Farmers Insurance Exchange and Farmers Exchange Capital.

In addition, A.M. Best has affirmed the ICR of “bbb” and the debt rating of “bbb” on USD 100 million 5.9% senior notes, due 2013 of the FGI subsidiary, 21st Century Insurance Group (Wilmington, DE). The outlook for all ratings is stable. All companies are domiciled in Los Angeles, CA, unless otherwise specified. (See link below for a detailed listing of the companies and ratings.)

The ratings reflect Farmers’ market leadership position, prudent risk management efforts, strong risk-adjusted capitalization and solid historical operating performance. In addition, strategic acquisitions have improved Farmers’ product and geographic diversification, as well as created a multi channel distribution system with captive agents, independent agents and direct-to-consumer sales.

Partially offsetting these strengths is Farmers’ variable operating performance due to catastrophe exposure, as demonstrated in 2011 due to a frequency of weather related events. However, Farmers has taken considerable measures to enhance its underwriting performance through targeted pricing actions and risk mitigation strategies, strengthened underwriting controls and increased utilization of segmentation.

In addition, the ratings reflect its strategic importance to Zurich Insurance Group, Ltd. (Zurich) (Switzerland). Farmers’ is the third-largest personal lines insurer in the United States, with a particularly strong market position in the western and southwestern United States. Although Zurich has no ownership interest in the Farmers Insurance Exchange, both entities are strategically linked via a management relationship between the Exchange and FGI (need full name), Zurich’s wholly owned subsidiary. This linkage provides Zurich with a source of consistent fee income. Given the structural relationship between Zurich and the Exchange, A.M. Best deviated from its “Rating Members of Insurance Groups” criteria by providing Farmers with rating enhancement from Zurich. As prescribed by the criteria, to be eligible for rating enhancement, an individual company must operate under common ownership, with the entity providing lift or maintaining board control together with common management. In this case, while there is common management, the boards of FGI and the Exchange are independent.

For a complete listing of Farmers Insurance Group and its members’ FSRs, ICRs and debt ratings, please visit www.ambest.com/press/071202farmers.pdf.

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”; “Ratings Members of Insurance Groups”; and “Understanding BCAR for Property/Casualty Insurers.” 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. For more information, visit www.ambest.com.

Copyright © 2012 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.

A.M. Best Co.
Raymond Thomson, ARM,908-439-2200, ext. 5621
Senior Financial Analyst
raymond.thomson@ambest.com
or
Jeffrey Mango, CPA,908-439-2200, ext. 5204
Vice President
jeffrey.mango@ambest.com
or
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
rachelle.morrow@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com

Source: A.M. Best Co.