By Michael Loney

June 30 - (The Insurer) - S&P Global Ratings has revised its outlook on Farmers Insurance Exchange and its core operating subsidiaries to positive from stable, and affirmed its A long-term issuer credit and financial strength ratings.

The rating action reflects S&P’s view that actions initiated by management over the last two years will enable Farmers to generate underwriting profits more in line with higher rated peers.

Farmers is a leading national writer of personal lines insurance with broad distribution channels and diverse products.

“One drawback of Farmers' geographic scope is it has larger exposures than industry peers to key states like California and Texas, but it continues to work to diversify geographically through a renewed focus on building larger, growth-oriented exclusive agencies in its east territory,” S&P said.

The rating agency continued that the addition of Farmers Workplace Solutions, the legacy property casualty business of MetLife, also provides new distribution capabilities from the employer platforms.

Farmers historically has generated combined ratios above 100%, but beginning at the end of 2023 it demonstrated a significant rebound in underwriting performance.

It posted a S&P Global Ratings adjusted combined ratio of 89.9% for 2024, an improvement of 16.6 percentage points compared to 106.5% in 2023.

“The improvement was due to the company's actions of slowing new business growth, accelerating rate increases, implementing non-rate underwriting actions, sharpening its risk selection, and taking significant expenses out of the business," S&P said.

Despite being significantly affected by the California wildfires in the first quarter of 2025, Farmers still generated an underwriting profit for the period with a company calculated combined ratio of 97.4%.

“We believe this is a reflection of its renewed longer-term goal of sustainable profitable growth, including the proactive tail risk reduction actions taken starting 2023," S&P said.

It added: “We expect gross premiums written to grow in 2025 as the company pivots to focusing on growth and the personal lines industry becomes more competitive. We expect this will lead to underwriting performance closer to 96%-99% in 2025-2026.”

S&P in June last year had revised the outlook of Farmers and its core operating subsidiaries to stable from negative.