Best’s News & Research Service - January 19, 2017 01:15 PM (EST)
A.M. Best Affirms Credit Ratings of the Members of Farmers Insurance Group
- January 19, 2017 01:15 PM (EST)
Oldwick //BestWire// - A.M. Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a” of the members of Farmers Insurance Group (Farmers) and Farmers Reinsurance Company (Farmers Re) (Woodland Hills, CA). Concurrently, A.M. Best has affirmed the Long-Term ICR of “a” of Farmers management company and attorney-in-fact, Farmers Group, Inc. (FGI), as well as the Long-Term Issue Credit Ratings (Long-Term IR) of “bbb+” on the outstanding surplus notes of Farmers Insurance Exchange (Exchange) (Woodland Hills, CA) and Farmers Exchange Capital. The outlook for all Credit Ratings (ratings) is stable. All companies are domiciled in Los Angeles, CA unless otherwise specified. (Please see the link below for a detailed listing of the companies and ratings).
The rating affirmations reflect Farmers’ adequate risk-adjusted capital position, profitable operating performance and an extensive business profile as the seventh largest personal lines writer in the U.S. market, with a particularly strong presence in the country’s western and southwestern regions. The ratings also reflect Farmers’ strategic importance to Zurich Insurance Group Ltd (Zurich) (Switzerland). Although Zurich has no ownership in the Exchange, both entities are strategically linked via an attorney-in-fact relationship between the Exchange and FGI, Zurich’s wholly owned subsidiary. This linkage provides Zurich with a consistent stream of income through management fees.
Partially offsetting these strengths is Farmers’ variable operating performance and a recent downturn in its underwriting performance in 2016, primarily due to higher loss ratios precipitated by adverse auto frequency and severity trends along with an increase in catastrophe losses. To combat the rise in loss costs, Farmers continues to make significant rate gains, strengthen underwriting controls and roll out new product offerings.
Given the attorney-in-fact relationship between FGI (Zurich’s wholly owned subsidiary) and the Exchange, A.M. Best deviated from its “Rating Members of Insurance Groups” criteria by providing Farmers rating enhancement from Zurich. As prescribed by the criteria, to be eligible for rating enhancement, an individual company must operate under common ownership, with the entity providing lift or maintaining board control together with common management. In this case, while FGI provides certain management services to the Exchange, the boards of FGI and the Exchange are independent of each other and there is no common ownership.
For a complete listing of the members of Farmers Insurance Group’s FSRs, Long-Term ICRs and Long-Term IRs, please visit Farmers Insurance Group .
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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