Mercury Casualty Affirmed

A.M. Best Co. affirmed the FSR of “A+” (Superior) for the Mercury Casualty Group (Los Angeles), as well as the FSR “A-” (Excellent) of American Mercury Insurance Group (Oklahoma City) subsidiaries of Mercury General Corporation. The outlooks for all ratings are stable. Additionally, A.M. Best assigned an “a” senior debt rating to Mercury General Corporation’s existing debt securities and an indicative rating of “a” to senior debt under the company’s $300 million shelf registration, of which $175 million remains.

The ratings reflect Mercury General’s superior capitalization, strong operating performance and dominant market presence as California’s largest independent agency auto writer. Mercury General has a disciplined underwriting approach, conservative operating philosophy and strong relationships with independent agencies. It also maintains manageable catastrophe exposure and extensively leverages technology to enhance operating efficiency, renewal persistency and customer satisfaction. Mercury General retains sustainable competitive advantages within its core personal auto segment, including pricing and risk classification expertise, aggressive claims management and a competitive expense structure. It benefits from considerable financial flexibility, reflective of modest financial leverage, access to capital markets and a history of consistent profitability.

The strengths are modestly offset by Mercury General’s geographic concentration in California that exposes it to market, regulatory and legislative risk. Since 1999, significant price competition and rising loss costs due to inflation in the California private passenger automobile insurance market have caused deterioration in loss experience. However, Mercury General continues to implement rate increases to improve underwriting profitability and reduce expense levels through various initiatives. Despite the recent deterioration in underwriting results, A.M. Best expects Mercury General to continue to outperform the industry composite.

Topics California Casualty