Farmers Insurance Rating from A.M. Best: Everything You Need to Know

When choosing an insurance company, one key indicator to evaluate is the insurer’s financial strength rating from A.M. Best. This rating helps give consumers confidence that a company has the ability to pay out future claims.

So what is Farmers Insurance’s current A.M. Best rating? In this article, we’ll cover:

• An overview of A.M. Best and their rating system
• Farmers Insurance’s A.M. Best ratings
• Details on their FSR of A (Excellent)
• What Farmers’ ratings indicate about their financial health
• How A.M. Best ratings differ from other agencies
• Why these ratings matter for policyholders
• And more

Follow along for an in-depth look at Farmers Insurance’s A.M. Best rating and what it means.

What is A.M. Best?

A.M. Best Company is a global credit rating agency focused on the insurance industry. They analyze the financial strength of insurers and assign letter grade ratings indicating an insurer’s ability to pay out future claims.

Founded in 1899, A.M. Best is one of the most respected voices evaluating the health of insurance carriers big and small. Their Financial Strength Ratings (FSRs) are a trusted benchmark for consumers.

Farmers Insurance’s A.M. Best Ratings

Farmers Insurance holds the following ratings from A.M. Best as of October 2022:

• Farmers Insurance Exchange – A (Excellent)
• Farmers Insurance Company, Inc. – A (Excellent)
• Farmers Specialty Insurance Company – A (Excellent)

These three core Farmers insurance entities each hold an A or “Excellent” Financial Strength Rating from A.M. Best.

This rating applies to their various products like Farmers auto insurance, homeowners insurance, business insurance, and other policies.

What an “A – Excellent” Rating Means

So what does Farmers’ A or Excellent Rating tell us about their financial situation? Here are the key implications:

• It indicates Farmers has superior financial strength and operating performance compared to industry standards.

• Farmers is seen as having an excellent ability to meet ongoing insurance obligations based on their balance sheet strength, operating results, and risk profile.

• The Excellent or A rating is the second highest rating A.M. Best issues, below only a rare A+ rating.

• It shows a low expectation of ceased or interrupted payments to policyholders due to Farmers entering rehabilitation or liquidation.

In plain terms, the A rating signals that Farmers is extremely financially stable with a very low risk of insolvency. They are seen as having superior capacity to pay out future claims.

Details of Farmers’ A.M. Best Rating Assessment

In their press release affirming Farmers’ A rating in 2021, A.M. Best cited these specific strengths:

• Very strong risk-adjusted capitalization
• Consistently favorable operating performance
• Established market presence and strong brand name recognition
• Effective implementation of analytics into its underwriting processes

The only minor critique mentioned was the elevated common stock leverage of Farmers’ ultimate parent company, Zurich Insurance Group. But overall, the analysis was very positive and supportive of Farmers’ finances.

How A.M. Best Differs from Other Rating Agencies

While S&P, Moody’s, and Fitch are more widely known, A.M. Best is still viewed as one of the foremost authorities specifically on assessing the financial strength of insurance carriers.

Here are some of the key ways A.M. Best ratings differ from competitors:

• A.M. Best focuses exclusively on insurers, while S&P, Moody’s, and Fitch cover many industries.

• Best has intermediate rating grades (Excellent, Good) while S&P and Moody’s use broader letter grade scales.

• A.M. Best relies more heavily on capital adequacy analysis.

• Best rates small insurers that the other agencies may overlook.

Why Farmers’ Strong A.M. Best Rating Matters

What does an Excellent A.M. Best rating mean for Farmers Insurance policyholders? It provides confidence that:

• Farmers has ample capital reserves to pay future claims, even following major events impacting many policyholders at once.

• Farmers invests their premiums wisely and prices risk appropriately based on data. Their operating strategy is sound.

• Policyholders are very unlikely to ever experience a situation where Farmers fails to pay out on a claim due to insolvency.

• Farmers has the resources and incentive to invest in continuous improvements that benefit consumers, like usage-based insurance apps.

The Takeaway on Farmers’ A.M. Best Ratings

Hopefully this breakdown gives you a sense of what the A.M. Best rating system is all about and why Farmers Insurance’s A/Excellent rating matters.

Of course, financial strength is just one facet of choosing an insurance provider – you still have to consider coverage, price, customer service, digital capabilities, and more.

But for many, seeing an Excellent rating from a respected agency like A.M. Best offers confidence in the insurer’s ability to be there when policyholders need them most. So Farmers’ A rating is certainly a positive indicator to keep in mind while shopping insurance.