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A.M. Best Affirms Credit Ratings of the Farmers Automobile Insurance Association and Its Subsidiaries

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A.M. Best has affirmed the Financial Strength Rating (FSR) of A
(Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICRs) of
"a" of The Farmers Automobile Insurance Association and its
wholly owned subsidiary, Pekin Insurance Company (together known
as Pekin). The outlooks of these Credit Ratings (ratings) remain
negative. Concurrently, A.M. Best has affirmed the FSR of A- (Excellent)
and the Long-Term ICR of "a-" of Pekin Life Insurance Company (Pekin
Life) [PKIN.OTC]. The outlooks of these ratings are stable. All
companies are domiciled in Pekin, IL.

Pekin Life is a publicly traded, over-the-counter company, although the
majority of its shares are owned by The Farmers Automobile Insurance
Association.

The ratings of Pekin reflect its balance sheet strength, which A.M. Best
categorizes as strongest, as well as its adequate operating performance,
neutral business profile and appropriate enterprise risk management
(ERM). The negative outlooks reflect deterioration in underwriting
performance that has resulted in underwriting and operating metrics
falling short of composite averages.

Pekin's balance sheet strength reflects the strongest level of
risk-adjusted capitalization, a conservative investment portfolio and
historically favorable reserve development. Partially offsetting these
positive rating factors is the elevated reserve leverage compared with
the composite. Pekin's operating performance has been volatile, driven
by weather-related losses and rising loss costs in the auto business.
However, A.M. Best expects underwriting initiatives and updated product
offerings to improve results prospectively. Pekin maintains a neutral
business profile with a variety of property/casualty (P/C) products
distributed exclusively through independent agents. Management continues
to enhance its ERM program to support the organization's risk profile.

Negative rating action could occur if underwriting and operating
performance continue to compare unfavorably with composite averages.

The ratings of Pekin Life reflect its balance sheet strength, which A.M.
Best categorizes as strongest, as well as its marginal operating
performance, neutral business profile and appropriate ERM.

The ratings of Pekin Life also reflect its integral role and positive
contribution to its P/C parent organization, as well as its diversified
product portfolio, strongest level of risk-adjusted capitalization and
high quality investment portfolio. Partially offsetting these rating
factors are the company's fluctuating operating results and its
geographical business concentration risk. The main operating pressures
experienced by Pekin Life are its lack of scale to support the diverse
product line and its relatively high operating expenses.

This press release relates to Credit Ratings that have been published
on A.M. 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 A.M. Best's
Recent
Rating Activity
web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view
Understanding
Best's Credit Ratings
. For information on the proper media
use of Best's Credit Ratings and A.M. Best press releases, please view
Guide
for Media - Proper Use of Best's Credit Ratings and A.M. Best Rating
Action Press Releases
.

A.M. Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit
www.ambest.com
for more information
.

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.

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