Fitch Affirms Mercury General’s Ratings; Outlook Stable
The affirmation reflects MCY's very strong capitalization, low financial leverage and favorable interest coverage, satisfactory underwriting results, and strong competitive position in
Fitch believes that MCY's capitalization is very strong. At
Fitch believes that MCY employs a moderate amount of financial leverage, has ample financial flexibility, and limited near-term liquidity needs. The company's debt-to-total capital ratio was 12.7% at
Fitch views MCY's recent underwriting profitability as sufficient to support the company's current rating levels. At year-to-date
Fitch recognizes that MCY has concentration risk related to the company's leading market share in
The key rating drivers that could result in an upgrade include sustainable improvement in underwriting profitability on an absolute basis and relative to peers, with an average combined ratio under 95%, a significant increase in capital with all else being equal, and material profitable growth outside of
The key rating drivers that could result in a downgrade include a sustained deterioration in underwriting profitability with an average combined ratio over 105% and a significant increase in operating leverage to over 2.5x. The key drivers that could result in a downgrade of the company's debt ratings given the current 'nonstandard' two-notch gap between MCY's IFS ratings and the senior unsecured debt ratings include a material increase in MCY's consolidated debt-to-capital ratio, or a material decline in the company's interest coverage ratio.
Fitch has affirmed the following ratings:
--IDR at 'A';
--Senior debt (
--IDR at 'A';
--Secured senior bank debt (
Mercury
--Insurer financial strength at 'A+'.
The Rating Outlook is Stable.
Additional information is available on Fitch's web site at 'www.fitchratings.com'
--'Insurance Rating Methodology' (
--'Non-Life Insurance Rating Methodology' (
--'Insurance Industry: Global Notching Methodology and Recovery Analysis' (
Insurance Industry: Global Notching Methodology and Recovery Analysis
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=493114
Insurance Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547766
Non-Life Insurance Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=506369
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