AM Best Revises Outlooks to Stable for Merchants Mutual Insurance Company and Subsidiaries

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has revised the outlooks to stable from positive and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings of “a-” (Excellent) of Merchants Mutual Insurance Company and its wholly owned subsidiaries, Merchants National Insurance Company and Merchants Preferred Insurance Company. All companies are headquartered in Buffalo, NY and together form Merchants Insurance Group (the group).

The Credit Ratings (ratings) reflect the group’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

The revision of the outlooks to stable reflects a decline in the group’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), and increased unfavorable development of prior-year loss reserves in 2024, which led to a material decline in surplus. The adverse reserve development was impacted by an increased emergence of claims severity in the group’s commercial auto liability, commercial multi-peril and other liability (occurrence) lines. Due primarily to the reserve strengthening, the group’s operating performance deteriorated substantially in 2024. Based on this, the group has undertaken a number of underwriting actions to improve operating results over the near term, including rate actions, targeted strategic growth and disciplined underwriting.

The group’s balance sheet strength assessment reflects its very strong level of risk-adjusted capitalization, as measured by BCAR, prudent investment portfolio and high quality reinsurance program. The group’s members are Northeast U.S. regional property & casualty insurers writing primarily commercial lines business. The group’s target market focuses on small businesses with fewer than 25 employees including contractors, professional offices, auto repair shops, retail and mercantile establishments, and commercial building owners.

This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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