AM Best revised its outlook to stable from negative and affirmed the credit ratings of members of Mercury Casualty Group (Mercury) based on its net ultimate losses and reinsurance recoveries following the January 2025 California wildfires.
The rating agency affirmed Mercury Member’s Financial Strength Rating of A (Excellent) and Long-Term Issuer Credit Rating (Long-Term ICR) of “a” (Excellent).
AM Best also revised its outlook to stable from negative and affirmed the long-term ICR of the organization’s listed ultimate parent, Mercury General Corporation (MGC), as “bbb” (good). The outlook on MGC’s $375 million 4.4% senior unsecured notes due 2027 has been revised to stable, and the long-term issuer credit rating was maintained at ‘bbb’ (good).
AM Best noted that the ratings reflect Mercury’s balance sheet strength, which it assesses as very strong, good operating performance, neutral business profile and appropriate enterprise risk management.
The revised outlook comes amid uncertainty surrounding Mercury’s ultimate net losses and future reinsurance structures and costs in the wake of devastating California wildfires in early 2025.
In February 2025, AM Best revised the outlook for MGC and its subsidiaries from stable to negative following wildfire losses.
In Q1’25, Mercury General Corporation reported net losses from wildfires of $108.3 million.
The company’s net catastrophe loss and loss adjustment expense, excluding reinsurance recoverables, was $380 million, compared with a pretax total of $2.2 billion, plus $100.6 million in recovery premiums.
The reinstatement premium was paid because Mercury had exhausted its catastrophe reinsurance limits for the 2025 treaty year. Mercury is also actively seeking subrogation from Southern California Edison in connection with the Eaton fire, with an estimated subrogation amount of $538 million. The company sold subrogation rights to the Palisades fire for $48 million.
Mercury reported policyholder surplus of $2.4 billion at the end of 2025, $362 million higher than the previous year, despite wildfires, with financial leverage of 19.2% and a combined ratio of 96.3%.
The company updated its catastrophe reinsurance program on July 1, 2025, with the current tower offering limits of $2.14 billion, compared with the previous limit of $1.29 billion.
AM Best affirmed the credit ratings of the following members of the Mercury Casualty Group and revised the outlook to stable: Mercury Insurance Company of America, California Automobile Insurance Company, California General Underwriters Insurance Company, 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 and Orion Indemnity Company.