AM Best Revises Outlooks to Negative for Farmers Insurance Company of Flemington

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 Insurance Company of Flemington (Farmers) (Flemington, NJ).

The Credit Ratings (ratings) reflect Farmers’ 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 (ERM).

The negative outlooks reflect pressure on Farmers’ operating performance given the observed volatility in results, which have been impacted by inflation and rising reinsurance costs, as well as labor shortages. While management has implemented a number of initiatives to counteract the deterioration in its results, the ultimate effectiveness of these efforts is uncertain and there is concern that Farmers will not be able to reverse the negative trend over the medium term.

Farmers’ balance sheet strength assessment is very strong and is supported by the company’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), which remained at the strongest level through the second quarter of 2024. Other balance sheet strength considerations include consistently favorable reserve development, low underwriting leverage ratios, robust liquidity and a comprehensive reinsurance program.

The limited business profile reflects Farmers’ geographic concentration as a smaller, single-state writer in New Jersey, which exposes the company to localized weather conditions, as well as significant regulatory, legislative and competitive pressures.

AM Best assesses Farmers’ ERM as appropriate for its size and scale of operations and reflects a stronger, formalized risk management culture that has been incorporated in recent years.

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