A.M. Best Downgrades Ratings of Farmers Mutual Fire Insurance Company

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has downgraded the financial strength rating to B+ (Good) from B++ (Good) and issuer credit rating to “bbb-” from “bbb” ofFarmers Mutual Fire Insurance Company (Farmers) (Okarche, OK). The outlook for both ratings is negative.

The rating downgrades reflect the decline in Farmers’ risk-adjusted capitalization following several years of underwriting losses and increasing exposure to catastrophe losses that represent a significant percentage of policyholders’ surplus. The company experienced several years of weather-related losses that impacted the profitability of its property book of business, which is concentrated in Oklahoma, Farmers’ single state of operation.

Partially offsetting these negative rating factors is Farmers’ relatively steady stream of investment income generated by a relatively conservative investment portfolio, as well as its long-standing agency relationships and local market knowledge in Oklahoma. In addition, several underwriting and operational strategies are being implemented to improve Farmers’ profitability.

Negative rating actions are possible if Farmers’ capitalization were to deteriorate to a level that no longer supports its current underwriting exposures.

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 “Catastrophe Analysis in A.M. Best Ratings.” 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.
Frederick DeLeon, 908-439-2200, ext. 5175
Senior Financial Analyst
[email protected]
or
Rick Decker, 908-439-2200, ext. 5423
Assistant Vice President
[email protected]
or
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
[email protected]
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
[email protected]

Source: A.M. Best Co.