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Investing.com -- Fitch Ratings has affirmed Mercury General Corporation’s property/casualty operating subsidiaries’ Insurer Financial Strength rating at ’A-’ and revised the outlook to stable from negative.
The improved outlook reflects reduced concerns about the January 2025 California wildfires and their potential impact on Mercury’s capital and profitability, according to Fitch’s Wednesday announcement.
Mercury reported a gross loss of $2.2 billion and a net loss of $359 million from the first-quarter wildfires, which caused an estimated $40 billion in industry-wide losses. The company’s first-half 2025 GAAP combined ratio was 105.4%, including nearly 13.5 percentage points related to catastrophe losses.
Fitch noted that elevated homeowners’ losses have been offset by "a vast improvement in auto results" and expects Mercury to achieve approximately breakeven results for full-year 2025.
As California’s eighth-largest personal automobile insurer and third-largest homeowners’ writer (excluding the California FAIR program), Mercury derives approximately 79% of its net written premiums from the state, creating significant market concentration risk.
The company strengthened its catastrophe reinsurance program on July 1, with coverage now exhausting at $2.14 billion, up substantially from the previous $1.29 billion. Mercury has also submitted a rate filing for its California homeowners program based on the state’s Sustainable Insurance Strategy.
As of June 30, Mercury had approximately $575 million in outstanding debt, including a $375 million senior note and $200 million in credit facility borrowings, both maturing in 2027. The company’s financial leverage stood at 23% with fixed-charge coverage at 2.2x.
Fitch indicated that a positive rating action could result from broader premium scale and geographic diversification coupled with consistent profitability, while negative factors could include combined ratios consistently above 105%, financial leverage sustained above 32%, or an outsized catastrophe loss.
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