Merchants Bonding outlook raised to positive as AM Best affirms A ratings

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Dan Blystone

2 hours ago

Merchants Bonding outlook raised to positive as AM Best affirms A ratings — Positive outlook for Merchants

The ratings action highlights improving capital strength at Merchants Bonding Co (Mutual) Group, a surety and fidelity insurer based in West Des Moines, Iowa. The revised outlooks to positive come as the group continues to post surplus growth through April 2026 and maintains solid underwriting profitability and liquidity.

Highlights

AM Best revised outlooks to positive from stable and affirmed A (Excellent) ratings for Merchants Bonding Company (Mutual) and Merchants National Bonding, Inc.
Positive outlook driven by strongest risk-adjusted capitalization, consistent surplus growth over five years through April 2026, and a high-quality, fixed-income weighted investment portfolio.
Merchants Bonding's operating results are supported by favorable loss reserve development, low-volatility profitable underwriting, geographic diversification, and technological advancements in enterprise AI.

Capital position and ratings rationale

As reported by AM Best, the agency has revised the outlooks to positive from stable and affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Ratings of “a+” (Excellent) for Merchants Bonding Company (Mutual) and Merchants National Bonding, Inc.

AM Best says the ratings reflect the group’s balance sheet strength, which it assesses as strongest, alongside strong operating performance, a neutral business profile and appropriate enterprise risk management. The companies are collectively known as Merchants Bonding Co (Mutual) Group and are domiciled in West Des Moines, Iowa.

The agency says the positive outlook reflects the insurer’s strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio, driven mainly by consistent surplus growth over the most recent five-year period and through April 2026. It also cites a high-quality, well-diversified investment portfolio weighted toward fixed-income securities, which contributes about nine points and 12 points to the operating ratio on a five-year and 10-year average basis, respectively.

Operating performance and market position

AM Best says Merchants Bonding also benefits from generally favorable loss reserve development in recent years, as well as solid liquidity supported by consistently positive underwriting and operating cash flows. Memberships with the Federal Home Loan Bank of Des Moines provide an added source of financial flexibility.

The group’s operating performance remains supported by consistently profitable underwriting results with low volatility and a pure loss ratio that is well below fidelity and surety composite averages. AM Best also points to geographic diversification across all 50 states and the District of Columbia, with no single state accounting for more than 20% of premiums.

The agency adds that the insurer has made significant progress in technology, particularly through developed enterprise artificial intelligence platforms. Its enterprise risk management framework is described as appropriate, supported by selective underwriting and a strong reinsurance program designed to protect surplus from potential losses.

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