AM Best Revises Outlooks to Negative for Farmers Mutual Fire Insurance Company of McCandless Township

OLDWICK, N.J.--()--AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” of Farmers Mutual Fire Insurance Company of McCandless Township (Farmers) (Wexford, PA).

The Credit Ratings (ratings) reflect Farmers’ balance sheet strength, which AM Best categorizes as strong, as well as its adequate operating performance, limited business profile and marginal enterprise risk management (ERM).

The revised outlooks to negative reflect the downturn in underwriting and operating performance metrics in recent years that are no longer comparable to the composite. Operating losses have been attributed to severe weather-related events, elevated fire losses and water damage claims. Underwriting initiatives to improve long-term performance have focused on weather loss mitigation strategies, inspections and re-underwriting efforts. However, the ultimate effectiveness of these actions remains uncertain.

Farmers’ balance sheet strength reflects very strong risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), partially offset by elevated common stock leverage and ongoing adverse reserve development, as well as limited scale and financial flexibility. The limited business profile assessment reflects the company’s product and geographic spread, which is focused on property business in western Pennsylvania. However, this exposure is partially mitigated through a comprehensive reinsurance program. AM Best views Farmers’ ERM as marginal, as the company lacks a formal ERM program or framework to identify and monitor organizational risks. However, third-party modeling and stress testing are used to evaluate catastrophe risks.

This press release relates to Credit Ratings that have been published on AM 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 AM 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. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data provider specializing in the insurance industry. The company does business in more than 100 countries. Headquartered in Oldwick, NJ, AM Best has offices in cities around the world, including London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Contacts

Maurice Thomas
Senior Financial Analyst
+1 908 439 2200, ext. 5794
maurice.thomas@ambest.com

Michelle Baurkot
Director
+1 908 439 2200, ext. 5314
michelle.baurkot@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

Contacts

Maurice Thomas
Senior Financial Analyst
+1 908 439 2200, ext. 5794
maurice.thomas@ambest.com

Michelle Baurkot
Director
+1 908 439 2200, ext. 5314
michelle.baurkot@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com