AM Best revises outlook to negative for Flemington-based Farmers Insurance

AM Best revised the outlook 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.

AM Best said the negative outlook reflected pressure on farmers’ operational performance “given the volatility observed in results, which were affected by inflation and rising reinsurance costs as well as labor shortages”.

The rating agency said management had implemented a number of initiatives to counter the deterioration in its results, but “the ultimate effectiveness of these efforts is uncertain and there is concern that farmers will not be able to reverse the negative trend in the medium term.”

AM Best said the credit ratings reflect the strength of Farmers’ balance sheet, which its analysts consider very strong, as well as adequate operational performance, limited business profile and adequate enterprise risk management (ERM).

The assessment of Farmers’ balance sheet strength is supported by the company’s risk-adjusted capitalization, as measured by Best’s capital adequacy ratio (BCAR), which remained at its strongest through the second quarter of 2024. Other balance sheet strength considerations include developing constantly favorable of reserves. , low underwriting leverage ratios, robust liquidity and a comprehensive reinsurance program, according to AM Best..

Also, the limited business profile reflects the geographic concentration of farmers as a smaller, single-state writer in New Jersey.

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

Source: AM Best

TOPICS
AM Best Agribusiness Trends