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A.M. Best Upgrades Ratings of Farmers and Mechanics Mutual Insurance Company of West Virginia
[October 31, 2014]

A.M. Best Upgrades Ratings of Farmers and Mechanics Mutual Insurance Company of West Virginia


OLDWICK, N.J. --(Business Wire)--

A.M. Best has upgraded the financial strength rating (FSR) to A (Excellent) from A- (Excellent) and the issuer credit rating (ICR) to "a" from "a-" of Farmers and Mechanics Mutual Insurance Company of West Virginia (Farmers) (Martinsburg, WV). The outlook for both ratings has been revised to stable from positive.

The rating upgrades and the revised outlook reflect Farmers' solid risk-adjusted capitalization, consistently favorable operating performance and long-standing local market presence. The ratings further reflect Farmers' solid balance sheet and prudent reinsurance program. Despite multiple catastrophic events and challenging market conditions, Farmers consistently outperformed the personal property composite through various market cycles as demonstrated by its consistent operating performance and profitable growth.

Partially offsetting these positive rating factors are Farmers' limited business profile as reflected by its exposure to significant weather-related events due to its business concentration in West Virginia and its elevated expense ratio. While the company maintains an expense disadvantage, mainly due to its commission and technology costs, the underlying book of business continues to perform well relative to the composite. However, as a predominantly single-state property writer, Farmers' underwriting results remain susceptible to weather-related events. A.M. Best believes Frmers' ratings are well positioned at the current rating level, however negative rating action could occur if operating results fall significantly short of prior year levels or there is a material decline in risk-adjusted capitalization.



Concurrently, A.M. Best has affirmed the FSR of B++ (Good) and the ICR of "bbb+" of Farmers and Mechanics Fire and Casualty Ins Co (FMF&C) (Martinsburg, WV). The outlook for both ratings is stable.

The ratings and outlooks reflect the company's adequate risk-adjusted capitalization, improved results through the 3rd quarter of 2014 derived from management's corrective initiatives and explicit financial support provided by its parent, Farmers. These strengths are partially offset by FMF&C's weak operating performance and unfavorable reserve trends in prior years, as well as its elevated expense position.


Positive rating action could occur if improved operating results are sustained, reserve trends stabilize and premium growth remains controlled.

Negative rating action could occur if the company's operating performance falls below A.M. Best's expectation or there is a material decline in risk-adjusted capitalization. Rating pressure would also occur if there are any significant changes in the strategic direction of the company.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:

  • Catastrophe Analysis in A.M. Best Ratings
  • Rating Members of Insurance Groups
  • Risk Management and the Rating Process for Insurance Companies
  • Understanding BCAR for Property/Casualty Insurers

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.


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