AM Best Revises Outlooks to Negative for Farmers Mutual Fire of Pennsylvania

Ratings firm AM Best has revised the outlooks to negative from stable of Farmers Mutual Fire Insurance Co. of Marble, Pennsylvania.

At the same time, it has affirmed the insurer’s Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent).

The credit ratings reflect Farmers Mutual’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.

According to AM Best, the revised outlooks reflect the “increased volatility” in Farmers Mutual’s key operating performance metrics in recent years, particularly in 2023, due to higher loss activity associated with weather-related events and fires, in conjunction with inflationary pressures that have driven loss costs upward.

“This has caused overall results to start shifting towards levels more closely aligned with carriers assessed at the adequate level, as opposed to the current strong level,” AM Best said.

Furthermore, through year-end 2023, AM Best said the insurer expects to post its first net loss in over 10 years, as well as a combined ratio moderately above break-even.

“While management is addressing the decline in operating performance through rate increases and tightening of its underwriting guidelines, the ultimate effectiveness of these measures remains uncertain,” AM Best said.

The ratings also reflect Farmers Mutual’s strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), along with its conservative underwriting and reserve leverage measures. The company has a limited business profile as a single-state personal property writer in Pennsylvania, which AM Best said exposes results to potentially frequent and severe weather-related events, as well as possible competitive and/or regulatory challenges.

“Overall, Farmers Mutual’s risk management capabilities are considered to be appropriate for its complexity of business and overall risk profile.,” AM Best concluded.

Source: AM Best

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