The first paragraph of the release has been replaced.
The corrected release reads:
The revised outlooks are due to the company’s surplus declines through the end of 2015 and beginning of 2016. These declines follow the merger of two previously independent companies, Farmers Mutual Fire Insurance Company of Branch County and Sanilac Mutual Insurance Company. The purpose of the merger was to diversify Farmers Alliance Mutual’s risk geographically in Michigan, while adding surplus to strengthen risk-adjusted capitalization. However, a majority of Sanilac’s business was severely underpriced and did not result in the immediate benefit originally planned in the merger. Farmers Alliance Mutual’s management is in the process of adequately pricing all of the business with stricter underwriting guidelines.
The company’s marginal capital position puts it at risk of dropping below the state-required $1 million surplus position. In addition, the company has produced unfavorable results over the past five years. However, the company had generally maintained surplus levels until the 2015 losses. Risk-adjusted capitalization is still adequate for the rating level but could be at risk of further deterioration unless operating results improve.