Standard & Poor’s assigned “AA” counterparty credit and financial strength ratings to Mercury Casualty Co., Mercury Insurance Co., and California Automobile Insurance Co. (collectively referred to as Mercury), which are the insurance operations of Mercury General Corp. The outlook is stable.
Major rating factors included:
• Extremely strong operating history—Since its founding by CEO George Joseph in 1961, Mercury has never experienced an unprofitable year. The combined ratio has been at or near the top of S&P’s interactively rated peer group for at least the past five years and control of losses has been the group’s forte.
• Capital—Combined capitalization is about twice the “AAA” floor of S&P’s capital model. Mercury has provided its parent some dividends for a modest holding-company stock buyback program, but S&P expects capital ratios to remain broadly at these levels as long as the current CEO is in place.
• Management—Management is undergoing a transition. A new president and chief financial officer were promoted from the ranks of management in October 2001. The management team is, on the whole, deep and experienced. Joseph is expected to remain active as CEO.
• Strategy—Mercury’s strong strategy is founded on an extremely strong commitment to independent agents, including variable compensation that encourages them to produce their best business for the company and compensation levels that are high for the industry.
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