AM Best Revises Outlooks to Negative for Farmers Mutual Fire Insurance Company of Salem County

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Farmers Mutual Fire Insurance Company of Salem County (Salem, NJ).

The Credit Ratings (ratings) reflect Farmers Mutual Fire Insurance Company of Salem County’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

The negative outlooks reflect the significant decline of Farmers Mutual Fire Insurance Company of Salem County’s risk-adjusted capitalization as a result of a decline in the company’s policyholders’ surplus coupled with sizable premium growth. Management has implemented a wide range of initiatives to improve its capital position and underwriting performance including rate revisions, higher deductibles, improve data analytics, update loss control inspection policy, stricter coastal underwriting guidelines to name a few, which ultimately should help to stabilize results and eventually lessen volatility.

The rating affirmations are based on Farmers Mutual Fire Insurance Company of Salem County’s very strong risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), high-quality investment portfolio, conservative reserving practice, moderate net underwriting leverage measures, stable loss reserving trends, sound liquidity measures and low reinsurance dependence. The company has increased surplus in four out of the past five years, except for year-end 2022, mainly due to positive net investment income and capital gains.

Negative rating actions could occur if Farmers Mutual Fire Insurance Company of Salem County’s risk-adjusted capitalization or balance sheet strength is no longer supportive of the very strong balance sheet strength assessment. An upward revision of the negative outlook is contingent upon the company’s ability to stabilize its risk-adjusted capitalization and improve its overall balance sheet strength.

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