AM Best Revises Outlooks to Stable and Affirms Credit Ratings of Mercury General Corporation and Its Subsidiaries
AM Best Revises Outlooks to Stable and Affirms Credit Ratings of Mercury General Corporation and Its Subsidiaries
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financial strength ratingfinancial
A financial strength rating is an assessment of an organization's overall financial health, indicating how well it can meet its financial commitments. Think of it as a report card that shows whether a company or institution is financially stable and capable of withstanding economic challenges. This rating helps investors gauge the level of risk involved in engaging with or investing in that organization.
long-term issuer credit ratingsfinancial
Long-term issuer credit ratings are assessments of a borrower's ability to repay debt over a period longer than one year. They help investors understand the level of risk involved in lending to that entity, similar to how a credit score indicates trustworthiness. These ratings influence borrowing costs and investment decisions, guiding investors on the safety and stability of their investments.
enterprise risk managementtechnical
Enterprise Risk Management is a process companies use to identify, assess, and prepare for potential problems that could disrupt their success, like financial losses or reputation damage. It’s like a safety plan that helps a business stay strong and adapt quickly when unexpected challenges come up. This helps the company protect its future and keep running smoothly.
reinsurancetechnical
Reinsurance is when insurance companies buy insurance for themselves to protect against very big losses. It’s like a car owner getting extra coverage from another company so that if there's a serious accident, the financial hit isn’t all on one company. This helps insurance companies stay stable and able to pay out when disasters happen.
subrogationregulatory
Subrogation is the legal right that lets one party—typically an insurer or creditor—step into another party’s shoes to recover money from a third party who caused a loss. Think of it as paying a friend’s repair bill and then seeking reimbursement from the person who caused the damage. Investors care because subrogation can reduce net losses, affect future insurance costs, influence litigation risk, and change a company’s expected cash flows or liabilities.
policyholder surplusfinancial
The amount by which an insurer’s assets exceed its liabilities, serving as the company’s financial cushion to pay claims and cover unexpected losses. Think of it like an emergency savings account for an insurance company: a larger surplus means a stronger ability to absorb shocks, meet obligations and expand underwriting capacity. Investors watch this figure as a quick gauge of solvency, regulatory strength and the insurer’s capacity to grow or withstand bad years.
combined ratiofinancial
The combined ratio is a way insurance companies measure how well they are doing by adding up all their costs and claims and comparing them to the money they earn from premiums. If the ratio is below 100%, it means the company is making a profit; if it's above 100%, they are losing money. It helps see if an insurance company is financially healthy or not.
catastrophe reinsurancetechnical
Catastrophe reinsurance is insurance bought by primary insurance companies to cover very large losses from rare events like hurricanes, earthquakes, or widespread fires. It works like a safety net or backup borrower that kicks in when claims exceed a high threshold, protecting the insurer’s finances and limiting the ripple effects on investors and policyholders. Investors care because the presence, terms, and cost of this protection affect an insurer’s risk of big unexpected losses and its capital stability.
OLDWICK, N.J.--(BUSINESS WIRE)--
AM Best has revised the outlooks to stable from negative and affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a” (Excellent) for the members of Mercury Casualty Group (Mercury). Concurrently, AM Best has revised the outlook to stable from negative and affirmed the Long-Term ICR of “bbb” (Good) of the organization’s publicly traded ultimate parent, Mercury General Corporation (MGC) (Los Angeles, CA) [NYSE: MCY]. AM Best has also revised the outlook to stable from negative and affirmed the Long-Term Issue Credit Rating of “bbb” (Good) of MGC’s $375 million, 4.4% senior unsecured notes, due 2027. (Please see below for a detailed list of Mercury’s member companies.)
These Credit Ratings (ratings) reflect Mercury’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The outlooks have been revised to stable from negative due to uncertainty surrounding Mercury’s net ultimate losses and future reinsurance structure and costs following the California wildfires in January 2025. Mercury had exposure to the Palisades and Eaton wildfires, which were the costliest catastrophic events in Mercury’s history. However, net of reinsurance recoverables, the company recorded just $380 million in net catastrophe losses and loss adjustment expenses, compared with $2.2 billion on a gross basis, before taxes from the wildfires, as well as an additional $100.6 million for reinstatement premium. Reinstatement premium was paid due to Mercury having exhausted its catastrophe reinsurance limits for the 2025 treaty year. Mercury is also actively pursuing subrogation against Southern California Edison on the Eaton fire and has recorded an estimated $538 million in subrogation recoveries. The company sold its subrogation rights for the Palisades fire for $48 million.
At Dec. 31, 2025, Mercury reported policyholder surplus of $2.4 billion, a $362 million increase over prior year-end, as well as financial leverage of 19.2% and a combined ratio of 96.3% for 2025 despite the wildfires. The company also renewed its catastrophe reinsurance program on July 1, 2025. The current tower provides for $2.14 billion in limits compared with the previous tower of $1.29 billion.
AM Best notes that rated- and non-rated-related strategic initiatives previously implemented by management are continuing to improve underwriting profitability and should strengthen prospective underwriting performance.
The FSR of A (Excellent) and the Long-Term ICRs of “a” (Excellent) have been affirmed with the outlooks revised to stable from negative for the following members of Mercury Casualty Group:
American 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 Indemnity Company of America
Mercury Insurance Company of Texas
Mercury County Mutual Insurance Company
Mercury Casualty Company
Mercury Insurance Company
Orion Indemnity 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 use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
