OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has upgraded the Financial Strength Rating (FSR) to A (Excellent) from A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “a” from “a-” of Farmers Mutual Insurance Company (WV) (Farmers Mutual) (White Hall, WV). The outlook of these Credit Ratings (ratings) has been revised to stable from positive.
The ratings reflect Farmers Mutual’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
These ratings actions also reflect Farmers Mutual’s very strong balance sheet derived from consistent and stable operating performance. In addition, the company maintains a comprehensive reinsurance program that sufficiently covers its tail risk and insulates policyholder surplus from catastrophic events. The company’s strong operating performance is derived from its strict underwriting discipline, which is reflected in positive net underwriting income on a regular basis and augmented by favorable net investment income. As a result, the company’s five year average pre-tax returns on revenue and equity outperform the personal property composite. Furthermore, the company’s five-year average combined and operating ratios also outperform the composite.
Partially offsetting these positive rating factors is the company’s geographic concentration of risk and narrow product line. As a single-state writer with a property book of business, the company is exposed to frequent and severe weather-related events, as well as regulatory, judicial and economic concerns. In addition, the company maintains an elevated expense position driven by commissions and other expenses. However, the elevated expense position is somewhat mitigated by the company’s sound underlying book of business, evidenced by its pure loss ratios that are well-below the composite average.
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