
AM Best Changes Outlook to Stable for Merchants Mutual Insurance Company and Its Subsidiaries
On May 1, 2025, AM Best revised the outlooks for Merchants Mutual Insurance Company and its subsidiaries, Merchants National Insurance Company and Merchants Preferred Insurance Company, from positive to stable. Despite this change, the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings of “a-” (Excellent) were affirmed for all entities. These companies, headquartered in Buffalo, New York, collectively operate under the Merchants Insurance Group umbrella.
Key Factors Influencing the Outlook Revision
The shift from a positive to a stable outlook was primarily driven by a decline in the group’s risk-adjusted capitalization, as measured by AM Best’s Capital Adequacy Ratio (BCAR). This decline was attributed to unfavorable developments in prior-year loss reserves during 2024, leading to a significant reduction in surplus. The adverse reserve development was notably impacted by increased claims severity in the group’s commercial auto liability, commercial multi-peril, and other liability (occurrence) lines.

Operational Performance and Strategic Responses
The reserve strengthening measures taken in response to the adverse developments led to a substantial deterioration in the group’s operating performance in 2024. To address these challenges and improve operating results in the near term, Merchants Insurance Group has implemented several underwriting actions. These include rate adjustments, targeted strategic growth initiatives, and disciplined underwriting practices aimed at enhancing profitability and stabilizing financial performance.
Assessment of Financial Strength
AM Best’s affirmation of the A- (Excellent) Financial Strength Rating reflects the group’s very strong balance sheet, as evidenced by its risk-adjusted capitalization levels. The group maintains a prudent investment portfolio and benefits from a high-quality reinsurance program. These factors contribute to the organization’s resilience and capacity to meet its ongoing policyholder obligations.
Business Profile and Market Focus
Operating primarily in the Northeastern United States, Merchants Insurance Group specializes in providing property and casualty insurance products, with a focus on commercial lines. The group’s target market comprises small businesses with fewer than 25 employees, including contractors, professional offices, auto repair shops, retail and mercantile establishments, and commercial building owners. This niche focus allows the group to tailor its offerings to the specific needs of small business clients.
Enterprise Risk Management and Future Outlook
AM Best assesses the group’s enterprise risk management as appropriate, indicating that the organization has implemented effective risk management practices commensurate with its size and complexity. While the outlook has been revised to stable, the affirmation of the current ratings suggests that Merchants Insurance Group is expected to maintain its financial strength and operational stability in the foreseeable future. The group’s proactive measures to address recent challenges demonstrate its commitment to sustaining its market position and financial health.
For more detailed information on the ratings and disclosures, please refer to AM Best’s official press release: (AM Best News).