...Merchants Mutual Insurance Company s (Merchants) ratings reflect its conservative reserving practices along with modest capitalization and underwriting results. The company s reserves continue to develop favorably while accident year combined ratios remain solid. Capital is modest with an A - Prism score, 313% risk-based capital (RBC) ratio and 0.9 operating leverage \01 net premiums written (NPW)/surplus. Despite distressed capital markets, Merchants surplus remained relatively flat through Sept. 30, 2008, at $126.7 million. Nonetheless, the risk of future investment losses ling ers given continued market volatility. Offsetting factors include Merchants ex posure to catastrophe losses, which are estimated at $1.2 million as of Nov. 30, 2008. The company utilizes reinsurance to help mitigate catastrophe risk, which however exposes its surplus to credit risk. Merchants Negative Outlook reflects the potential capital strain from its planned growth initiatives,...
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