A.M. Best Affirms Financial Strength and Debt Ratings for Farmers Insurance Group

A.M. Best Co. has affirmed the financial strength rating of A (Excellent) for Farmers Insurance Group.

Concurrently, A.M. Best has affirmed the bbb+ ratings of the Farmers Group Capital I & II preferred securities (QUIPS) issued in 1995 in the amount of $500 million and due in 2025. The outlook on all ratings is stable. The rating of Farmers Insurance Group reflects the group’s market leadership position, prudent risk management efforts, strategic importance to its affiliate, Zurich Financial Services, and the financial flexibility provided by Farmers Group, Inc., the insurance group’s attorney-in-fact.

Farmers accounts for approximately 25 percent of Zurich’s worldwide premiums and is a dominant personal lines insurer with strong brand name recognition and the ability to provide the overall organization with cross-marketing opportunities and best practices expertise. Offsetting these strengths is Farmers’ diminished capitalization, high underwriting leverage and volatile operating performance over the last few years.

A.M. Best anticipates the group will report improved operating trends in 2003 and beyond, barring the occurrence of greater than normal catastrophe losses. Farmers has taken substantive actions to enhance its underwriting performance through both aggressive pricing actions and strengthened underwriting controls. These measures resulted in improved personal auto and homeowners underwriting margins into 2002 and 2003.

Further, the group’s commercial lines margins should improve substantially going forward from the levels seen over the last five years due to improved pricing and risk segmentation.

The financial strength rating of A (Excellent) has been affirmed for the following subsidiaries’ of the Farmers Insurance Group:

— Farmers Insurance Exchange

— Mid-Century Insurance Company

— Truck Insurance Exchange

— Fire Insurance Exchange

— Farmers Insurance Company of Oregon

— Farmers Insurance Company of Washington

— Civic Property and Casualty Company

— Exact Property and Casualty Company

— Farmers Insurance of Columbus Inc

— Neighborhood Spirit Property and Casualty Company

— Texas Farmers Insurance Company

— Farmers Insurance Company of Idaho

— Farmers Insurance Company Inc

— Farmers New Century Insurance Company

— Illinois Farmers Insurance Company

— Farmers Insurance Company of Arizona

— Farmers Texas County Mutual Insurance Company

— Mid-Century Insurance Company of Texas