AM Best Revises Outlooks to Positive for Merchants Bonding Company (Mutual) and Merchants National Bonding, Inc.

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long- Term ICRs) of “a+” (Excellent) of Merchants Bonding Company (Mutual) and its affiliate, Merchants National Bonding, Inc. Both companies are collectively known as Merchants Bonding Co (Mutual) Group (Merchants Bonding) and are domiciled in West Des Moines, IA.

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

The outlook revisions to positive reflect Merchants Bonding’s strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), which was primarily driven by consistent surplus growth in the most recent five-year period and through April of 2026. The positive outlooks also reflect the group’s high-quality, well-diversified investment portfolio that is weighted toward fixed-income securities, which contributed approximately nine and 12 points to the operating ratio on a five- and 10-year average basis, respectively. In addition, the group has reported generally consistent favorable loss reserve development on an accident- and calendar-year basis in recent years. Furthermore, the group’s liquidity position remains solid, which is enhanced by consistently positive underwriting and operating cash flows. The group’s Federal Home Loan Bank of Des Moines’ memberships provide an additional source of financial flexibility.

The group’s strong operating performance is supported by consistently profitable underwriting results with low volatility and a pure loss ratio that is significantly below the fidelity and surety composite averages. The neutral business profile assessment is supported by their geographic diversification across all 50 states and the District of Columbia with no single state accounting for more than 20% of premiums. Additionally, the group has made significant advancements with respect to technology; in particular, its well-rounded and developed enterprise artificial intelligence platforms. The appropriate ERM assessment is characterized by its selective underwriting and a strong reinsurance program that protects surplus from the possibility of losses.

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