A.M. Best Co. has affirmed the financial strength rating (FSR) of 'B+' (Good) and the issuer credit rating (ICR) of 'bbb-' of Hanover Fire and Casualty Insurance Company of Conshohocken, Penna. However, Best also revised the outlook on both ratings to negative from stable.

Best explained: "The change in outlook is the result of a decline in the company's prospective risk-adjusted capitalization following the signing of a definitive agreement to merge with another property/casualty mutual insurer.

"The change in outlook also reflects the integration risks associated with the merger and the substantial increase in business anticipated. Hanover Fire and Casualty's ratings reflect its adequate level of capitalization that includes a portfolio of conservative invested assets and an expertise in its target market."

The signing of the agreement was approved by Hanover Fire and Casualty's Board of Directors. The closing of the transaction is subject to shareholder and regulatory approval; however, it is expected to close by the end of the third quarter.