Improved operating performance and favorable risk-adjusted capitalization led A.M. Best to upgrade two ratings for Farmers Mutual Fire Insurance Company of Salem County, a New Jersey-based insurer.

A.M. Best upgraded the financial strength rating to B++ (Good) from B+ (Good) and issuer credit rating to “bbb” from “bbb-”. The outlook for both ratings is stable.

The company writes home and business policies in New Jersey and Maryland.

The ratings service said the Salem, N.J.-based company’s positive ratings factors are partially offset by the company’s geographic concentration of risk in New Jersey, which in the past has resulted in an inconsistent operating performance. Salem’s previous unfavorable operating performance was related to underground storage tank (UST) losses and weakened risk-adjusted capitalization due to increases in modeled probable maximum loss from its concentration of business along the New Jersey coast.

However, the ratings service said, Salem has managed to significantly lessen these accumulated risk exposures by reducing writings along catastrophe-exposed areas. The company also has witnessed a significant decrease in claims relating to UST losses due partly to application of stricter underwriting standards. The combination of these favorable trends in accumulated risk exposures has improved Salem’s operating performance and has resulted in stronger risk-adjusted capitalization, according to A.M. Best’s analysis.