Best Affirms Mercury General and Operating Subs Ratings; Outlook Stable

November 2, 2011

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A+’ (Superior) and issuer credit ratings (ICR) of “aa-” of L.A.–based Mercury Casualty Group and its members.

Best also affirmed the FSR of ‘A-‘ (Excellent) and ICRs of “a-” of American Mercury Insurance Group (AMI), which is based in Oklahoma City, and its members, as well as the ICR of “a-” of Mercury and AMI’s parent, Mercury General Corporation. The outlook for all of the ratings is stable.

Mercury’s ratings reflect its “solid risk-adjusted capital position, consistently favorable operating performance and the competitive advantage within its core personal auto segment,” Best explained. “Mercury’s capitalization is supported by strong operating returns through profitable underwriting performance and consistent investment income. This is somewhat offset by Mercury’s sizeable shareholder dividends in recent years, which has constrained surplus growth.”

In addition Best indicated that “Mercury’s competitive advantage in its core personal auto segment is derived through pricing and risk classification expertise, strong independent agency relationships and aggressive claims management practices. Mercury also benefits from the financial flexibility of Mercury General Corporation due to its modest financial leverage and access to capital markets.”

Best said the ratings on AMI “recognize its adequate level of risk-adjusted capital, improved catastrophe risk management and the demonstrated history of financial support provided by its parent. These positive rating factors are offset by AMI’s elevated underwriting leverage, its relatively high expense structure and continued exposure to catastrophe losses in its operating region.”

Best summarized the companies affected by the rating actions as follows:
The FSR of ‘A+’ (Superior) and ICRs of “aa-” have been affirmed for Mercury Casualty Group and its following members:
* Mercury Casualty Company
* Mercury Insurance Company
* California Automobile Insurance Company
* Mercury Indemnity Company of Georgia
* Mercury Insurance Company of Georgia
* Mercury Insurance Company of Illinois
* Mercury National Insurance Company
* Mercury Insurance Company of Florida
* Mercury Indemnity Company of America

The FSR of ‘A-‘ (Excellent) and ICRs of “a-” have been affirmed for American Mercury Insurance Group and its following members:
* American Mercury Insurance Company
* American Mercury Lloyds Insurance Company
* Mercury County Mutual Insurance Company

Source: A.M. Best

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