A.M. Best Downgrades Ratings of Farmers’ Mutual Insurance Company (MI)

A.M. Best Co. has downgraded the financial strength rating to C++ (Marginal) from B- (Fair) and issuer credit rating to “b” from ”bb-” of Farmers’ Mutual Insurance Company (MI) (Farmers’ Mutual) (Traverse City, MI). The outlook for both ratings is negative.

The ratings reflect Farmers’ Mutual’s continued unfavorable operating performance trends that have caused surplus losses for five consecutive years. In addition, Farmers’ Mutual’s geographic concentration of risk within the northern portion of the lower peninsula of Michigan exposes the company to frequent and severe weather-related events.

These negative rating factors are partially offset by Farmers’ Mutual’s increased premium volume, which has provided it with some economies of scale. However, the company’s recent surplus losses and continued unfavorable underwriting performance support the current rating outlook.

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”; and “Rating Members of Insurance Groups.” Methodologies can be found at http://www.ambest.com/ratings/methodology.