A.M. Best Co. has revised the outlook to positive from stable and
affirmed the financial strength rating of A- (Excellent) and issuer
credit rating of "a-" of Farmers and Mechanics Mutual Insurance
Company of West Virginia (Farmers) (Martinsburg, WV).
The ratings and revised outlook reflect Farmers' trend in above average
operating results driven by its management's disciplined underwriting
practices, generally conservative operating fundamentals and extensive
local market knowledge, which has been evident over several years.
Farmers' favorable earnings have been attributed to strong underwriting
results complemented by a steady stream of investment income. The
outlook further recognizes the expectation that the company's operating
performance and capitalization will continue to benefit from
management's judicious risk management practices, underwriting
discipline, prudent reinsurance program and conservative investment
The ratings further acknowledge Farmers' solid risk-adjusted
capitalization and strong pretax operating returns over the past several
years, which have consistently outperformed the personal property
composite average. The company's capital position is derived from below
average underwriting leverage andconsistent generation of capital from
profitable underwriting results combined with its conservative
As a property predominant writer with a geographic concentration in West
Virginia, Farmers' earnings remain susceptible to localized and severe
weather-related events, as well as changes in the regulatory and
competitive environments. Underwriting profitability remains a key
objective of management, who remains focused on adequate pricing, an
aggressive inspection program as part of its exposure management process
and technology enhancements.
The ratings and outlook of Farmers and Mechanics Fire and Casualty
Ins Co (Martinsburg, WV), a wholly owned subsidiary of Farmers' are
unaffected by the revised outlook of Farmers.
Future positive rating actions may occur following continued strong
underwriting and operating performance by Farmers, while maintaining
strong capitalization. However, negative rating actions could result if
the company's operating performance were to fall materially short of its
expectations or if there is a considerable deterioration in its
The methodology used in determining these ratings is Best's Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best's rating process and contains the different rating criteria
employed in the rating process. Key criteria utilized include: "Risk
Management and the Rating Process for Insurance Companies"; "Catastrophe
Analysis in A.M. Best Ratings"; "Rating Members of Insurance Groups";
and "Understanding BCAR for Property/Casualty Insurers." Best's Credit
Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS
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