AM Best has revised the outlooks to stable from negative and affirmed the credit ratings for the members of Mercury Casualty Group (Mercury), based on Mercury’s net ultimate losses and reinsurance recoveries following the January 2025 California wildfires.
The ratings agency 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.
AM Best also revised the outlook to stable from negative and affirmed the Long-Term ICR of “bbb” (Good) for the organisation’s publicly traded ultimate parent, Mercury General Corporation (MGC). MGC’s $375 million, 4.4% senior unsecured notes due 2027 have had their outlook revised to stable, with the Long-Term Issuer Credit Rating affirmed at “bbb” (Good).
AM Best noted that these ratings reflect Mercury’s balance sheet strength, which it assesses as very strong, as well as adequate operating performance, a neutral business profile, and appropriate enterprise risk management.
The revised outlook follows uncertainty surrounding Mercury’s net ultimate losses and future reinsurance structure and costs following the devastating California wildfires at the start of 2025.
In February 2025, AM Best had revised the outlooks to negative from stable for MGC and its subsidiaries following the wildfire losses.
For Q1’25, Mercury General Corporation reported a net loss of $108.3 million as a result of the wildfires.
Net of reinsurance recoverables, the company recorded $380 million in net catastrophe losses and loss adjustment expenses, compared with $2.2 billion on a gross basis, before taxes, plus an additional $100.6 million for reinstatement premium.
Reinstatement premium was paid because Mercury had exhausted its catastrophe reinsurance limits for the 2025 treaty year. Mercury is also actively pursuing subrogation against Southern California Edison for the Eaton fire, with an estimated $538 million in subrogation recoveries. The company sold its subrogation rights for the Palisades fire for $48 million.
At year-end 2025, Mercury reported a policyholder surplus of $2.4 billion, a $362 million increase from the prior year, with financial leverage of 19.2% and a combined ratio of 96.3% despite the wildfires.
The company renewed its catastrophe reinsurance program on July 1st, 2025, with the current tower providing $2.14 billion in limits, compared with $1.29 billion previously.
AM Best affirmed the credit ratings and revised the outlooks to stable 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, and Orion Indemnity Company.
