CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - NOVEMBER 01, 2006 12:00 AM (EST)
A.M. Best Co. has placed the financial strength rating (FSR) of A- (Excellent) and the issuer credit rating (ICR) of "a-" of Merchants Insurance Company of New Hampshire, Inc. (Merchants NH) under review with negative implications. Placing the ratings under review with negative implications follows the announcement today that American European Group, Inc. (AEG) has entered into an agreement to purchase Merchants Group, Inc. (MGI) and its wholly owned operating subsidiary, Merchants NH.
This action reflects A.M. Best's view that AEG's management team will face significant execution risk in managing and retaining Merchants NH's existing book of casualty business. Merchants NH's existing servicing agreement with Merchants Mutual Insurance Company, which owns just under 12% of MGI, is not set to expire until year-end 2007. Furthermore, Merchants NH's current ratings reflect the benefits of being owned and managed by Merchants Mutual, which has been providing the company with infrastructure, including underwriting and claims handling systems. The negative implications for Merchants NH do not apply to Merchants Mutual, whose rating remains unaffected by this action.
The cash acquisition is valued at $70.8 million. The ratings will remain under review pending the close of the transaction, at which time A.M. Best expects to downgrade the FSR and ICR due to the previously mentioned concerns regarding execution risk.
For Best's Ratings, an overview of the rating process and rating methodologies, please visit Best's Rating Center.
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.