AM Best withdraws credit rating of Farmers Mutual Insurance Co. from Michigan

AM Best revised the outlook to negative from stable on the long-term issuer credit rating (long-term ICR) and affirmed the financial strength rating (FSR) of C++ (marginal) and long-term ICR of ‘b+’ ( marginal). ) of Farmers Mutual Insurance Company of Michigan (FMIC) (Coldwater, MI). The FSR outlook is stable. At the same time, AM Best withdrew these credit ratings (ratings) because the company requested to no longer participate in AM Best’s interactive rating process.

The ratings reflect FMIC’s balance sheet strength, which AM Best rates as adequate, as well as marginal operating performance, very limited business profile and adequate enterprise risk management.

The negative long-term ICR outlook reflects pressure on the overall assessment of balance sheet strength associated with recent declines in the surplus and subsequently risk-adjusted capitalization. Additionally, increased volatility in underwriting results has the potential to further erode capital and overall balance sheet strength.

After a slight decline in 2023, modest capital erosion in the first half of 2024 continues to be a product of FMIC’s marginal operating performance driven by increased volatility in net underwriting losses, AM Best said.

The credit rating agency said management was challenged by the company’s very limited business profile as a predominantly single-state writer in Michigan, focused on policyholders in rural areas of the state’s lower peninsula. Product offerings primarily consist of homeowner multi-hazards, followed by fire and allied lines.

Due to the company’s geographic and product concentrations, its results are exposed to frequent and severe weather events and fire losses. In addition, FMIC faces a high potential for regulatory challenges within the state. While management continues to implement corrective actions from the June 2024 financial statement, these mitigation strategies have yet to gain significant traction to strengthen the capital position.

Source: AM Best

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Agribusiness AM Best Michigan