Moody's Investors Service has upgraded Los Angeles-based FarmersInsurance Group, saying the group's current and future business andfinancial profile have improved.

Financial strength ratings for Farmers Insurance Group and fourof Farmers' exchanges rose from "A3" to "A2," and the surplus notedebt ratios increased from "Baa3" to "Baa2." The rating outlook isstable.

The move reflects improvements in profitability, reserveadequacy and financial flexibility "which have benefited from thegroup's efforts to re-underwrite its books of business and exitcomplex, highly volatile commercial lines of business," Moody'ssaid.

The upgrade, said the rating firm, also reflects the level ofsupport the exchanges receive from Farmers Group Inc. and itsparent company, Zurich Financial Services Group.

Zurich provides capital support primarily in the form of surplusnotes to the exchanges as well as reinsurance coverage, Moody'ssaid. However, a reduction of support could lead to a downturn inthe ratings, Moody's suggested.

The upgrade affects Farmers Insurance Exchange, FarmersInsurance Exchange of Oregon, Truck Insurance Exchange, FireInsurance Exchange and Farmers Exchange Capital.

Moody's said Farmers Insurance Group had $5.7 billion instatutory surplus at Dec. 31, 2007. The exchanges, collectively,are leading writers of personal insurance products in the UnitedStates and in 2007 generated $16.1 billion in gross premiumswritten and net income of $533 million, said Moody's.