AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” (Excellent) of The Farmers Automobile Insurance Association, its wholly owned subsidiary, Pekin Insurance Company, and the reinsured subsidiary, Pekin Select Insurance Company (collectively referred to as Pekin). At the same time, AM Best has revised the outlooks to negative from stable and affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” (Excellent) of Pekin Life Insurance Company (Pekin Life). All companies are domiciled in Pekin, IL.
The Credit Ratings (ratings) of Pekin reflect its balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The ratings of Pekin Life reflect its balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, neutral business profile and appropriate ERM.
The negative outlooks on Pekin reflect recent adverse underwriting experience in its property lines of business as a result of numerous convective storms that impacted much of its operating territories. As a result, the recent surplus losses have put pressure on the group’s balance sheet strength assessment. Management has implemented a wide range of initiatives to improve its capital position and underwriting performance, including placing a personal lines moratorium in all states, rate revisions, higher deductibles, personal lines agency terminations and expense reductions, which should help to stabilize results and eventually lessen volatility.
The negative outlooks on Pekin Life reflect its unfavorable operating performance in recent years and operating pressures at the parent level.
The rating affirmations are based on Pekin’s supportive risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), high-quality investment portfolio, conservative reserving practice, stable loss reserving trends and sound liquidity measures.
Negative rating actions could occur if Pekin’s risk-adjusted capitalization or balance sheet strength is no longer supportive of the very strong balance sheet strength assessment. A return to a stable outlook is contingent upon the group’s ability to stabilize its risk-adjusted capitalization and improve its overall balance sheet strength and operating performance.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
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