CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - JUNE 06, 2007 12:00 AM (EDT)
A.M. Best Co. has affirmed the financial strength rating (FSR) of A- (Excellent) and assigned an issuer credit rating (ICR) of "a-" to Merchants Mutual Insurance Company (Mutual) (Buffalo, NY). A.M. Best has also assigned an FSR of A- (Excellent) and ICRs of "a-" to Merchants National Insurance Company (National) (Manchester, NH) and Merchants Preferred Insurance Company (Preferred) (Buffalo, NY). Additionally, A.M. Best has assigned an FSR of A- (Excellent) and an ICR of "a-" to Merchants Insurance Group. All the above companies are part of the Merchants Insurance Group. The outlook for all ratings is stable.
National was formed on August 9, 2006 as a wholly owned subsidiary of Mutual. National will write non-admitted business that has many of the characteristics of Mutual's traditional business.
Preferred was formed on September 29, 2006 as a wholly owned subsidiary of National to write the business previously written through the group's former affiliate, Merchants Insurance Company of New Hampshire, Inc. (New Hampshire) (Concord, NH), which was acquired by American European Group in March 2007.
Both National and Preferred are expected to begin operations in mid-2007, utilizing the resources, infrastructure, systems and management of Mutual. Furthermore, the group will continue to support New Hampshire with underwriting and claims management services for several years, including ceding to New Hampshire 25% of the group's gross writings until year end 2009. The remaining 75% of the group's writings will be pooled between the three operating companies: Mutual (70%), National (20%) and Preferred (10%).
The ratings reflect the group's strong capitalization and improved earnings in recent years, while the outlook reflects A.M. Best's view that positive earnings momentum will be sustained in the medium term.
These positive factors are offset by the group's historically subpar underwriting and operating returns, on both an accident and calendar year basis, which were partly due to adverse loss reserve development. More recent results reflect the absence of adverse reserve development and the positive impact from a series of initiatives implemented to return the group to a more profitable footing.
For Best's Ratings, an overview of the rating process and rating methodologies, please visit Best's Rating Center.
Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. For more information, visit www.ambest.com.