OLDWICK, N.J.–(BUSINESS WIRE)–#insurance—AM Best has downgraded the Long-Term Issuer Credit Ratings (Long-Term ICR) to “a” (Excellent) from “a+” (Excellent) and affirmed the Financial Strength Rating (FSR) of A (Excellent) of certain members of Mercury Casualty Group (Mercury). Additionally, AM Best has upgraded the FSR to A (Excellent) from A- (Excellent) and the Long-Term ICRs to “a” (Excellent) from “a-” (Excellent) of the three members of the American Mercury Insurance Group that were previously rated as a separate rating unit but now are reinsured by Mercury Casualty Company (Brea, CA) and rated as part of Mercury.
Concurrently, AM Best has downgraded the Long-Term ICR to “bbb” (Good) from “bbb+” (Good) of the organization’s publicly traded ultimate parent, Mercury General Corporation (MGC) (Los Angeles, CA) [NYSE: MCY]. AM Best also has downgraded the Long-Term Issue Credit Rating to “bbb” (Good) from “bbb+” (Good) of MGC’s $375 million, 4.4% senior unsecured notes, due 2027.
The outlook of these Credit Ratings (ratings) is stable. See below for a listing of the companies.
The ratings of Mercury reflect the group’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 (ERM).
The Long-Term ICR downgrades of Mercury and MGC consider their significant earnings deterioration in 2022, driven by unfavorable operating performance resulting from increased claim frequency and from severity caused largely by inflationary trends, as well as declining investment performance driven by investment market volatility. Furthermore, Mercury’s weakened underwriting performance has been exacerbated by its concentration in California, where the regulatory environment was challenging in 2022, particularly with respect to the company’s and other insurers’ difficulty in achieving premium rate increases, especially with respect to the private passenger auto line of business, which comprises most of Mercury’s underwritten portfolio.
AM Best notes that Mercury has implemented detailed strategic initiatives to restore underwriting profitability, which include rate and non-rate actions. In January 2023, Mercury received regulatory approval for a California personal automobile rate increase of 6.9%, effective March 2023, which should strengthen its prospective underwriting performance. AM Best expects the group’s earnings to improve gradually in 2023.
The Long-Term ICRs have been downgraded to “a” (Excellent) from “a+” (Excellent) and the FSR of A (Excellent) 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 Indemnity Company of America
- Orion Indemnity Company
The FSR has been upgraded to A (Excellent) from A- (Excellent) and the Long-Term ICRs upgraded to “a” (Excellent) from “a-” (Excellent) with stable outlooks for the newly added reinsured affiliates of Mercury Casualty Company:
- 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 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.
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