AM Best has revised the outlook to negative from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of C++ (Marginal) and the Long-Term ICR of “b+” (Marginal) of Farmers Mutual Insurance Company of Michigan (FMIC) (Coldwater, MI). The outlook of the FSR is stable. Concurrently, AM Best has withdrawn these Credit Ratings (ratings) as the company has requested to no longer participate in AM Best’s interactive rating process.

The ratings reflect FMIC’s balance sheet strength, which AM Best assesses as adequate, as well as its marginal operating performance, very limited business profile and appropriate enterprise risk management.

The negative outlook of the Long-Term ICR reflects pressure on the overall balance sheet strength assessment associated with recent declines in surplus and subsequently risk-adjusted capitalization. Additionally, the increased volatility in underwriting results has the potential to erode capital and overall balance sheet strength further.

Following a slight decline in 2023, modest capital erosion through the first half of 2024 continues to be a product of FMIC’s marginal operating performance driven by increased volatility in net underwriting losses. Management has been challenged by the company’s very limited business profile as a single-state property predominant writer in Michigan focused on policyholders in rural areas across the lower peninsula of the state. Product offerings primarily consist of homeowners’ multiple peril, followed by fire and allied lines. Due to the company’s geographic and product concentrations, its results are exposed to frequent and severe weather-related events, as well as fire losses. Additionally, FMIC faces an elevated potential to regulatory challenges within the state. While management continues to implement corrective actions as of the June 2024 financial statement, these mitigation strategies have yet to gain material traction to strengthen the capital position.

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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Justin Aimone Financial Analyst +1 908 882 1595 justin.aimone@ambest.com

Christopher Sharkey Associate Director, Public Relations +1 908 882 2310 christopher.sharkey@ambest.com

Maurice Thomas Senior Financial Analyst +1 908 882 2392 maurice.thomas@ambest.com

Al Slavin Senior Public Relations Specialist +1 908 882 2318 al.slavin@ambest.com