OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has revised the outlooks to stable from negative and affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” of the members of the Merchants Insurance Group (Merchants). All companies are headquartered in Buffalo, NY.
The revised outlooks reflect Merchants’ strong level of risk-adjusted capitalization, improved favorable operating results, growing use of predictive analytics to improve underwriting results further and a solid regional presence. The group has added markedly to capital over the past three years, as the underwriting enhancement, rate changes and business mix decisions have taken hold in the group’s book. Along with the tightening of the group’s underwriting approach and several years of rate increases, management decided to exit the personal lines market in all states except New York. Results in 2016 show the overall success of these changes as the group’s operating metrics have moved back toward historical levels.
Offsetting these positive rating factors are the substantial volatility in the group’s operating results over the past five years, continued weather-related loss exposure, elevated expense structure and inherent challenges associated with operating in a competitive marketplace, as well as prior-year adverse reserve development.
The ratings of Merchants’ operating units would be impacted negatively if material losses in its capitalization were incurred; if the group were to have a severe and sustained reduction in the profitability of its investment portfolio; if a renewed acute deterioration in the group’s reserves affects surplus; or if a severe reduction in the profitability of its core books of business occurs. Conversely, positive rating movement could ensue with sustained and consistent profitable results adding to surplus in the near to midterm.
The outlooks have been revised to stable from negative, and the FSR of A- (Excellent) and the Long-Term ICRs of “a-” have been affirmed for the following members of the Merchants Insurance Group:
- Merchants Mutual Insurance Company
- Merchants National Insurance Company
- Merchants Preferred Insurance Company
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.
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