AM Best Revises Outlooks to Negative for Farmers Insurance of Flemington

AM Best has revised the outlooks 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 outlooks reflect pressure on Farmers’ operating performance “given the observed volatility in results, which have been impacted by inflation and rising reinsurance costs, as well as labor shortages.”

The ratings agency said management has implemented a number of initiatives to counteract 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 over the medium term.”

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

Farmers’ balance sheet strength assessment is supported by the company’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), which remained at the strongest level through the second quarter of 2024. Other balance sheet strength considerations include consistently favorable reserve development, low underwriting leverage ratios, robust liquidity and a comprehensive reinsurance program, according to AM Best..

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

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

Source: AM Best