Oldwick, N.J.-based insurance rating service A.M. Best Co. has downgraded the financial strength rating to “B (Fair)” from “B-plus (Good)” and issuer credit rating to “double-b” from “triple-b-minus” of Farmers Mutual Insurance Company of Traverse City, Mich. Best said the outlook for both ratings was revised to negative from stable.
Best said the ratings reflect Farmers’ Mutual’s “continued unfavorable operating performance trends that have caused surplus losses for five consecutive years, as well as its geographic concentration of risk within the northwestern portion of the lower peninsula of Michigan, which exposes the company to frequent and severe weather-related events.”
“The negative rating factors are partially offset by the company’s low underwriting leverage, balance sheet liquidity and consistent investment income,” Best said. However, the company’s recent capital losses and continued unfavorable underwriting performance support the revised rating outlook.
According to Highline Data, a Summit Business Media company, which also owns National Underwriter, from 2005 to 2007 Farmers Mutual reported income loss in each of those years.
In 2005, the income loss stood at $210,591; in 2006 it was $200,020; and in 2007 it was $190,323. Net premiums written were less than $1 million in all three of those years.
Best also withdrew the rating on Farmers Mutual Insurance Company based in Ellinwood, Kan., after the company requested the rating be withdrawn.
Best said it affirmed the financial strength rating of “B (fair) and issuer credit rating of “double-b” with outlook for both ratings at negative.
The rating, Best said, reflected the company’s concentration of risk “that resulted in fluctuating operating performance and impacted its risk-adjusted capitalization during the last five year period.”
According to Highline Data, in 2007 the company reported income loss of $332,457; in 2006 it reported net income of $127,620; and in 2005 net income stood at $838,202.
Net premium written in 2007 was $3.99 million; in 2006 $4.28 million; and in 2005 it was more than $5 million.
Both companies are mutual insurance carriers.