Recently, Fitch Ratings affirmed the issuer default rating
Mercury General Corporation
) at "A." The rating agency also affirmed the IDR of Mercury
General's subsidiary - Mercury Casualty Co. - as well as the debt
rating on its senior secured bank debt at "A."
Further, Fitch affirmed the insurer financial strength rating
(IFS) of Mercury General's subsidiaries - Mercury Casualty Co.,
Mercury Insurance Co., Mercury Insurance Co. of Georgia, Mercury
Insurance Co. of Illinois, Mercury Insurance Co. of Florida,
Mercury Indemnity Co. of Georgia, Mercury Indemnity Co. of
America, Mercury National Insurance Co. and California Automobile
Insurance Co. - at "A+." The outlook for all the above-mentioned
ratings is stable.
The rating affirmation was based on Mercury General's sturdy
capitalization level, low financial leverage, ample interest
coverage and strong market position in California, partially
offset by a decline in operating profitability in 2013, product
and geographic concentration and risks related to the
implementation of geographic expansion plans.
Fitch may revise the ratings upward if the underwriting
results improve significantly and stay at that level over the
long term, the average combined ratio stays below 95%, the
risk-adjusted capitalization improves significantly and the
company witnesses growth outside California.
Alternatively, a downward revision is possible if the
underwriting results decline significantly, average combined
ratio rises above 103% and operating leverage surges beyond 2.3x.
Further, a significant decline in the interest coverage ratio or
surge in the consolidated debt-to-capital ratio can lead to a
downgrade in the debt rating.
Rating affirmations or upgrades from credit rating agencies
play an important part in retaining investor confidence on the
stock as well as maintaining credit worthiness in the market.
Rating downgrades, therefore, adversely affect the business,
apart from increasing the costs of future debt issuances.
We believe that the affirmed ratings will help Mercury General
retain investor confidence and help it write more businesses
going forward, thereby boosting its results.
Mercury General currently carries a Zack Rank #2 (Buy). Other
property and casualty insurers with the same Zacks Rank are
Montpelier Re Holdings Ltd.
United Fire Group Inc.
MERCURY GENL CP (MCY): Free Stock Analysis
MONTPELIER RE (MRH): Free Stock Analysis
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