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A.M. Best Affirms Financial Strength Ratings

The Farmers Automobile Insurance Association and Pekin Insurance Company

A.M. Best has affirmed the Financial Strength Rating (FSR) of “A” (Excellent) of Pekin Insurance® Group and our two intercompany pool members, The Farmers Automobile Insurance Association and its wholly owned subsidiary, Pekin Insurance Company. Financial Strength Ratings are published in A.M. Best’s Insurance Reports and represent their independent opinion of an insurer’s financial strength and ability to meet its ongoing insurance policy and contract obligations. The affirmed rating reflects our balance sheet strength which A.M. Best categorizes as strongest, as well as adequate operating performance, neutral business profile, and appropriate enterprise risk management. Strong risk-adjusted capitalization is driven by our conservative investment portfolio and historically favorable loss reserve developments. This rating acknowledges our expectation for improved operating results based on underwriting initiatives and upgraded technology. A.M. Best also noted management’s efforts to continually enhance our enterprise risk management program to support our organization’s risk profile.

The outlook for the FSR remains negative. A.M. Best stated that the outlook reflects deterioration in underwriting performance, driven by weather-related losses and rising loss costs in the auto business. Pekin Insurance recognizes its vulnerability to losses from wind, hail, and tornado and in recent years has taken many significant steps to mitigate our exposure, including entry into Arizona, preparation for entry into another southwestern state, restructuring of reinsurance contracts, utilization of actual cash value settlement policy language, and implementation of By-Peril rating. The reasons behind the poor automobile results are well-documented in public forums and include more cars on the road driving more miles, higher medical costs, higher repair costs for newer vehicles, and distracted driving. To address this continuing trend, among other measures, we have tightened eligibility guidelines, revised financial stability scores, updated factors for violations and accidents, and continued the development of predictive analytic modeling.

The strength of our financial position allows us to take a longer-term view of operations, and we continue to invest in software and technology through our Pekin Insurance Virtual Overall Transformation project. The new policy administration platform will give us a competitive edge and enable efficient growth and profitability for many years.

Pekin Life Insurance Company

A.M. Best has also affirmed the FSR of “A-” (Excellent) for Pekin Life Insurance Company. The outlook remains stable. The ratings of Pekin Life Insurance Company reflect its integral role and positive contribution to the Pekin Insurance Group, as well as its strong risk-adjusted capitalization and a diversified product portfolio.

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