A.M. Best Co. has affirmed the financial strength rating of A (Excellent) of Foremost Corporation Group (Foremost) (Caledonia, Mich.). The rating outlook is stable.
The rating reflects Foremost’s strong risk-adjusted capitalization on a stand-alone basis, solid operating performance, established market position, as well as the advantages associated with being affiliated with Farmers Insurance Group (Farmers) and the mutually beneficial synergies created between these two groups. Offsetting factors include Foremost’s above-average underwriting leverage relative to its peers and significant exposure to weather-related losses.
Foremost’s strong risk-adjusted capital position is based on its conservative investment risk profile and the catastrophe reinsurance provided by Farmers. Additionally, the group’s favorable operating profitability, derived from its strict underwriting discipline and conservative investment policy, enabled Foremost to produce strong surplus growth over the past five years.
The group’s elevated underwriting leverage was the result of rollover business from Farmers after its acquisition of Foremost. Net premium leverage is expected to improve through organic surplus growth over the next several years. In addition, Foremost’s net exposure to hurricane loss events is substantially reduced by its sound reinsurance program, particularly the catastrophe reinsurance protection from Farmers.
Foremost is a stand-alone mobile home insurer and currently maintains a competitive advantage in this line of business. Product expansion into specialty lines and substantial cross-selling opportunities with Farmers also provides additional growth opportunities.
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