AM Best revises Mercury and its subsidiaries’ outlooks to stable from negative

Core Viewpoint - AM Best has revised the outlooks for Mercury Casualty Group to stable from negative and affirmed their credit ratings based on the assessment of net ultimate losses and reinsurance recoveries following the January 2025 California wildfires [1][4]. Group 1: Credit Ratings and Outlook - The Financial Strength Rating of A (Excellent) and Long-Term Issuer Credit Ratings of "a" (Excellent) have been affirmed for the members of Mercury [2]. - The Long-Term Issuer Credit Rating of "bbb" (Good) for Mercury General Corporation has also been affirmed, with its outlook revised to stable [3]. Group 2: Financial Performance and Losses - For Q1 2025, Mercury General Corporation reported a net loss of $108.3 million due to the wildfires, with net catastrophe losses and loss adjustment expenses totaling $380 million after reinsurance recoverables [5]. - The company recorded gross catastrophe losses of $2.2 billion before taxes, plus an additional $100.6 million for reinstatement premium [5]. Group 3: Reinsurance and Subrogation - Mercury has exhausted its catastrophe reinsurance limits for the 2025 treaty year, necessitating the payment of a reinstatement premium [6]. - The company is pursuing subrogation against Southern California Edison for the Eaton fire, estimating $538 million in recoveries, and has sold subrogation rights for the Palisades fire for $48 million [6]. Group 4: Balance Sheet and Ratios - At year-end 2025, Mercury reported a policyholder surplus of $2.4 billion, an increase of $362 million from the previous year, with a financial leverage of 19.2% and a combined ratio of 96.3% despite the wildfires [7]. - The catastrophe reinsurance program was renewed on July 1, 2025, providing $2.14 billion in limits, an increase from the previous $1.29 billion [7]. Group 5: Members of Mercury Casualty Group - AM Best affirmed the credit ratings and revised the outlooks to stable for various members of Mercury Casualty Group, including American Mercury Insurance Company and Mercury Insurance Company of Texas among others [8].