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.
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