Moody's Upgrades Farmers Insurance Groups

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

Financial strength ratings for Farmers Insurance Group and four of Farmers' exchanges rose from "A3" to "A2," and the surplus note debt ratios increased from "Baa3" to "Baa2." The rating outlook is stable.

The move reflects improvements in profitability, reserve adequacy and financial flexibility "which have benefited from the group's efforts to re-underwrite its books of business and exit complex, highly volatile commercial lines of business," Moody's said.

The upgrade, said the rating firm, also reflects the level of support the exchanges receive from Farmers Group Inc. and its parent company, Zurich Financial Services Group.

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

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

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