A.M. Best Affirms Ratings of Mercury General Corporation and Its Operating Subsidiaries

OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of “aa-” of Mercury Casualty Group (Mercury) (Los Angeles, CA) and its members. Additionally, A.M. Best has affirmed the FSR of A- (Excellent) and ICRs of “a-” of American Mercury Insurance Group (AMI) (Oklahoma City, OK) and its members.

Concurrently, A.M. Best has affirmed the ICRs of “a-”, senior debt rating of “a-” on existing debt securities and the indicative rating of “a-” of the senior debt under the $300 million shelf registration, of which $175 million remains of Mercury and AMI’s parent, Mercury General Corporation (Los Angeles, CA) (NYSE: MCY). The outlook for all ratings is stable. (See below for a detailed listing of the companies and ratings.)

Mercury’s ratings reflect its strong risk-adjusted capital position, conservative investment risk profile and low dependence on reinsurance. Moreover, Mercury’s capitalization is supported by solid surplus growth through a consistently positive operating performance. In addition, Mercury maintains a sustainable competitive advantage within its core personal auto segment that includes 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.

AMI’s ratings reflect its adequate level of risk-adjusted capital, stabilizing operating performance and the demonstrated history of financial support provided by Mercury General Corporation. These positive rating factors are offset by AMI’s elevated underwriting leverage due to recent significant premium growth, its relatively high expense structure and exposure to catastrophe losses in its operating region. Compounding these matters is the lack of adequate catastrophe management strategies that serve to support and protect the group's capital in the event of severe weather over the long term.

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

The ICR of “a-” has been affirmed for Mercury General Corporation.

The following debt rating has been affirmed:

Mercury General Corporation—

-- “a-” on $125 million 7.250% senior unsecured notes, due 2011

The following indicative rating on securities available under the $300 million shelf registration, of which $175 million remains, has been affirmed:

Mercury General Corporation—

-- “a-” on senior unsecured debt

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.