OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has upgraded the Financial Strength Rating (FSR) to A (Excellent) from B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “a” from “bbb+” of Farmers and Mechanics Fire and Casualty Ins. Co. (Farmers and Mechanics Fire and Casualty), a wholly owned subsidiary of Farmers and Mechanics Mutual Insurance Company of West Virginia (Farmers and Mechanics Mutual) (both domiciled in Martinsburg, WV). A.M. Best also has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” of Farmers and Mechanics Mutual. The outlook for these Credit Ratings (ratings) remains stable.
The rating upgrades of Farmers and Mechanics Fire and Casualty follow several years of profitable business growth, increasing policyholders’ surplus and an increasing contribution to the two operating companies’ combined operating results, which have been favorable. Farmers and Mechanics Fire and Casualty possesses adequate risk-adjusted capitalization that has been attained through several years of improved operating results. The results and ratings also are highly reflective of the integration of the company into the Farmers and Mechanics Mutual operations, which remain under the direction of the same management team. The strong underwriting performance has been evident by average five- and 10-year combined ratios that outperform the private passenger standard auto composite. In addition, the ratings recognize management’s extensive knowledge of its market. There are significant benefits derived from its majority owner, Farmers and Mechanics Mutual, which bring economies of scale and explicit and implicit support, which includes prior capital injections. The ratings further reflect the company’s business plan, which is based on the alignment of strategies and underwriting knowledge of Farmers and Mechanics Mutual.
Partially offsetting these positive rating factors is the company’s geographic risk concentration in West Virginia, which exposes its surplus to weather-related losses and competitive market conditions. In addition, the company maintains an elevated expense position as compared with the private passenger standard auto composite.
Negative rating action could occur if a sudden and unexpected event were to impact profitability, causing a significant decline in policyholders' surplus and risk-adjusted capitalization.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
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