Standard & Poor’s lowered its counterparty credit and financial strength ratings on Farmers Insurance Exchange group to “A” from “AA-.” The outlook is stable. S&P also lowered its subordinated debt ratings on Farmers’ surplus notes to “BBB+” from “A-.” The ratings were removed from CreditWatch, where they were placed August 2001.
The actions reflect continued weakening operating performance in the personal lines sector, reduced though adequate level of capitalization, and limited financial flexibility. Partially offsetting these weaknesses are Farmers’ solid business position and its strategic importance to Zurich Financial Services (Zurich) as demonstrated by its investment in deeply subordinated surplus notes and major reinsurance support.
Continued underwriting losses are expected to offset the initiatives taken in late 2001 to improve capital levels, such as a capital infusion of $500 million and an enhanced reinsurance program, but operating performance is expected to improve in 2002 with capital adequacy in the 105 percent to 110 percent range.
Topics Agribusiness
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