OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a+” of the members of Mercury Casualty Group (Mercury) (headquartered in Los Angeles, CA). Concurrently, AM Best has affirmed the Long-Term ICR of “bbb+” of the organization’s publicly traded ultimate parent, Mercury General Corporation (MGC) (Los Angeles, CA). In addition, AM Best has affirmed the Long-Term Issue Credit Rating of “bbb+” of MGC’s $375 million, 4.4% senior unsecured notes, due 2027. Lastly, AM Best has affirmed the FSR of A- (Excellent) and the Long-Term ICRs of “a-” of the insurance entities within the American Mercury Insurance Group (AMI) (headquartered in Oklahoma City, OK). The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed listing of companies.)
The ratings of Mercury reflect the group’s balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The very strong balance sheet assessment reflects Mercury’s solid risk-adjusted capitalization, strong liquidity measures and generally risk-balanced investment portfolio. Financial flexibility is provided through the publicly traded parent, MGC. These aspects are offset partially by recent adverse prior-year reserve development and net leverage ratios that exceed those of the private passenger standard auto composite. Mercury has been adapting its reinsurance program annually to provide capacity for large weather events, notably wildfire losses. The strong operating performance reflects the long-term stability in Mercury’s underwriting and operating results and total returns that compare favorably with the composite. These results are supported by expense ratios favorable to industry results. The assessment of the business profile captures the group’s significant market share in private passenger auto and homeowners insurance markets in its domicile of California, strong independent agency relationships and depth of experience managing the intricacies of the jurisdiction. Nonetheless, the concentration exposes Mercury to market anomalies, such as adverse trends in bodily injury loss costs, natural catastrophe losses, regulatory dynamics and judicial decisions. ERM is considered appropriate for an organization of Mercury’s profile and market position.
The ratings of Mercury could be downgraded if underwriting performance is not sustained at its recently improved levels, or if there is a deterioration in operating performance metrics or in its risk-adjusted capitalization, or if Mercury records material adverse reserve development.
The ratings of AMI reflect the group’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate ERM.
The overall assessment of risk-adjusted capital captures inherent strengths in the balance sheet that are moderated by restraints on financial flexibility and adverse reserve development that inhibits capacity. Variability in underwriting results is balanced by consistent investment results, leading to overall supportive operating performance. AMI’s concentrated profile includes jurisdictions with distinct weather exposures. The group receives the benefits of being affiliated with Mercury, including alignment of ERM, common management, brand recognition and an enterprise reinsurance program.
Negative rating action could occur if the group experiences a deterioration in operating performance or if there is any material change in the relationship between the affiliated entities of AMI and other affiliates within MGC.
The financial flexibility provided by MGC was demonstrated when it issued $375 million of senior unsecured notes in 2017. Financial leverage remains modest and interest coverage remains strong. MGC also maintains a significant level of liquid assets, over $150 million as of September 2020, if needed.
The FSR of A (Excellent) and the Long-Term ICRs of “a+” have been affirmed with stable outlooks for the following members of Mercury Casualty Group:
- Mercury Casualty Company
- Mercury Insurance Company
- California Automobile Insurance Company
- California General Underwriters Insurance Company, Inc.
- 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 the Long-Term ICRs of “a-” have been affirmed with stable outlooks for the following members of American Mercury Insurance Group:
- American Mercury Insurance Company
- American Mercury Lloyds Insurance Company
- Mercury County Mutual Insurance Company
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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