AM Best Revises Outlooks to Stable and Affirms Credit Ratings of Mercury General Corporation and Its Subsidiaries

Business Wire

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.