Mercury Insurance is a California-based auto and home insurance provider and one of the state’s leading personal lines insurers. It has operations in nearly a dozen states and employs more than 6,300 independent agents. If you're wondering whether this is a good insurer to recommend to your clients, you've come to the right place.
In this article, we’re focusing on Mercury Insurance ratings and its other key performance indicators. This is to help you and your clients make informed decisions on whether the insurer and its products are a good fit for their needs.
To know whether Mercury Insurance is a strong enough carrier to merit your attention and your clients’ business, it’s important to look at their financial strength ratings (FSR). This metric is a vital indicator whether they are solvent and financially capable of honoring your client’s claims.
The outlook for the financial future of Mercury Insurance is another metric worth looking at, since this indicates whether the company has long-term financial stability. So, what kind of rating does Mercury Insurance have and what is its future financial outlook? For answers, we turn to the four most reputable and popular insurance ratings agencies:
These are the latest Mercury Insurance ratings for financial strength from each agency:
Mercury Insurance's rating from A.M. Best is at “A” or “Excellent”, which is the third highest ranking possible from the ratings agency. This FSR is considered an indicator of a company with strong financial health and claims-paying ability. In a recent press release, A.M. Best affirmed its rating of the insurer and its subsidiaries.
The “A” FSR means good news for brokers and their clients, since Mercury Insurance is seen as a financially stable and potentially reliable partner for policyholders.
In terms of outlook, however, A.M. Best downgraded Mercury to “negative.” This downgrade was caused by the recent California wildfires that impacted the company’s bottom-line.
As for Fitch, this ratings agency gave an “A-” ranking for Mercury Insurance. Fitch’s assessment is that the insurer has a strong capacity to meet its policyholder and contractual obligations. The “A-” rating is considered a “strong” rating at Fitch’s standards and indicates that Mercury Insurance’s core subsidiaries are viewed as financially stable and able to pay claims, despite adverse economic conditions.
Fitch’s outlook for Mercury Insurance is also negative. Previously, the agency rated it as “stable.” Their outlook was revised likewise due to the significant losses the insurance company suffered from the California wildfires. Although Fitch reports that Mercury’s financial position is strong enough to withstand these losses, there is increased uncertainty about the company’s ability to maintain its current FSR.
According to Fitch’s assessment, Mercury Insurance may be very susceptible to another large catastrophe or suffer the effects of an accumulation of several smaller weather-related claims in the near-term. Fitch warns that the insurer faces heightened risk factors that can adversely affect its future financial stability.
Mercury Insurance’s rating from Moody’s is A3, meaning “good,” but in the lowest rung of the medium-grade. This rating indicates that the company has a strong ability to meet insurance policy and contractual obligations but is susceptible to adverse conditions. This grade is the lowest rating within the “A” category. Previously, Moody’s rated the insurer as having an “A2” ranking, which was the middle of the “A” category.
Moody’s gave Mercury Insurance a negative outlook due to its high concentration of business in California, along with its significant exposure to disasters, especially the wildfires common to that state. Moody’s also cited ongoing uncertainty regarding the heavy losses from the recent wildfires. These catastrophic events have had an impact on Mercury Insurance’s profitability, capital, and business strategy.
Finally, the S&P rating for Mercury Insurance is “A-.” While this does connote “strong” and has a good capacity to meet its financial commitments to policyholders (even in adverse circumstances), this is the lowest level within S&P’s “A” category. As with Moody’s ratings, Mercury Insurance ratings signify that it is financially stable, but is vulnerable to risks that can impact its future stability.
As with the other ratings agencies, S&P reports a negative outlook for Mercury Insurance. This is also largely due to its recent exposure to the wildfires in California. With this outlook, S&P may downgrade its rating of the insurer even lower if adverse trends continue or worsen in the short-term.
Learn more about these insurance ratings agencies and their methodology in this guide.
Another important measure of an insurer’s viability is its issuer credit rating (ICR). This is a key set of ratings used by rating agencies to evaluate the overall creditworthiness of an insurance company. This not only includes its ability to pay policyholders’ claims but also meet its broader financial obligations.
As an insurance broker, understanding ICRs helps you assess insurers’ financial stability and long-term viability so you can know whether or not to recommend them to your clients. The ICRs can be of two types:
The long-term ICR assesses the likelihood that an insurance company will meet its long-term financial commitments. These can include bonds, notes, and other debt obligations.
This metric indicates an insurer’s overall financial strength and stability over a multi-year horizon.
A higher-ranking ICR (e.g. A, A-) means that the insurer is more likely to meet its long-term obligations and debt, and withstand economic cycles, large claims, or catastrophic events.
Any downgrade to an insurance company’s long-term ICR can signal potential trouble ahead. This can include deteriorating capital, poor risk management, or exposure to adverse market trends.
Short-term ICR evaluates the insurer’s ability to meet its short-term financial obligations, typically those that are due within one year. This includes short-term loans or commercial papers.
The short-term ICR can reflect the insurer’s liquidity and immediate financial flexibility. This metric can be important when assessing an insurer’s ability to handle sudden, large claims or short-term cash flow requirements.
So, what are Mercury Insurance’s long-term and short-term ICRs from each ratings agency?
Here’s what our research found:
This indicates an “excellent” ability to meet ongoing senior financial obligations. The “a” rating also means that the company is investment grade and has strong creditworthiness.
This means that Mercury Insurance has a superior ability to meet their short-term obligations as they come due. AMB-1 is the highest positive rating for short-term ICR.
"BBB” denotes an investment-grade credit rating, signifying good credit quality and an adequate capacity to meet long-term financial commitments. The caveat is that Mercury Insurance has more risk than higher-rated insurers.
This is the second-highest rating from Fitch for its short-term ICR, indicating good capacity for timely payments of financial commitments. Although this rating also means that Mercury Insurance has some vulnerability to adverse changes in circumstances.
The “A3” rating from Moody’s denotes an upper-medium grade credit, with good financial security and a strong ability to meet long-term obligations. However, this also suggests elements that can be susceptible to risk in adverse conditions.
Moody’s “P-2” or “Prime-2” rating means that Mercury Insurance possesses a strong ability to repay short-term debt obligations, but is not rated as high, so it has some vulnerability to risks.
S&P gave two separate Mercury Insurance ratings:
S&P’s “A-” rating for Mercury Insurance’s subsidiaries shows they have a strong capacity for meeting their financial commitments, including policyholder claims. “A-” is an investment-grade rating and reflects the insurer’s ability to pay claims and meet other obligations, even in adverse conditions.
Meanwhile, the “BBB” rating for Mercury Insurance’s holding company indicates that it is rated at a notch lower than its subsidiaries. This outcome can be typical, since it’s common industry practice for holding companies to be structurally under their operating subsidiaries.
After all, the holding company relies on its operating subsidiaries for its dividends and other payments, and their obligations (like senior debts) are deemed to carry slightly more risk.
As a broker assessing viable insurers, it’s advised that you prioritize the “A-” rating for the operating subsidiaries. This rating measures Mercury Insurance’s capacity for paying claims and ensuring policyholder security. The BBB rating is more relevant to investors or other parties dealing with the insurer’s debt.
The “A-2” rating indicates a satisfactory capacity to meet short-term obligations, although it is not as stable as “A-1”.
Apart from the FSR, ICR, and average cost of annual premiums, it’s important to look at what customers say about Mercury Insurance. For this purpose, we looked at several reviews of the company and parties who publish complaints, like J.D. Power and the Better Business Bureau (BBB). For customer satisfaction and reviews, here’s what we found:
|
Pros |
Cons |
|---|---|
|
Below-average insurance rates |
Products only available in 11 states |
|
No accident forgiveness |
|
|
Affordable option for drivers with low credit |
Unexpected rate increases |
|
Offers distinct mechanical protection cover for mechanical and car system issues |
Unresponsive communication |
The latest Mercury Insurance rating from BBB is A+. This is the highest rating possible for a company. In the insurer’s case, it garnered a score of 97 out of 100. Its score denotes a high level of trustworthiness and that the company is likely to resolve consumer complaints in good faith. You can view the BBB profile on their website.
First, it’s important to know that Mercury Insurance Group is not a BBB-accredited business. Businesses have no obligation to seek BBB accreditation. A business must agree to BBB Standards for Trust and pass BBB’s vetting process if they want accreditation.
BBB charges a fee for accreditation. This fee supports BBB’s efforts to fulfill its mission of advancing marketplace trust. More importantly, BBB business profiles generally cover a three-year reporting period and provide information to help consumers exercise their own best judgment. BBB profiles are subject to change and cannot be reproduced for sales or promotional purposes.
Typically, the information in BBB profiles is provided by third parties who publish complaints or reviews. While the BBB requests these third parties to confirm the accuracy of their information, this is not an iron-clad guarantee that the information is accurate.
As for J.D. Power, our research found that Mercury Insurance’s scores for both claims satisfaction and shopping experience are below the industry average, scoring 663 and 609 respectively. The perfect score in J.D. Power is 1000. Mercury ranks close to the bottom among major US auto insurers in J.D. Power’s most recent studies.
For its auto insurance, Mercury insurance is available in these states:
Its homeowners’ insurance is available in all the listed states, except for Florida. Why is it important to know where Mercury’s insurance products are available? Taking into account the company size and volume of business can be a good indicator of its profitability. In turn, its profitability contributes to its stability and ability to pay claims.
The table below shows a summary of the annual cost of premiums for the most common insurance products offered by Mercury Insurance, compared to national average prices.
|
Product |
Mercury Avg. premium |
National Avg. premium |
Cost difference |
|---|---|---|---|
|
Auto (full coverage) |
$2,266 |
$2,679 |
-$413 |
|
Auto (min. coverage) |
$656 |
$808 |
-$152 |
|
Homeowners’ insurance ($300k dwelling) |
$822 |
$2,397 |
-$1,575 |
Given their FSR, ICR, customer service record, and other key factors, is Mercury Insurance a legit first choice? Should you recommend this auto insurer and its products? The answer is a mixed bag. If your clients live in a state where the car insurance is expensive, the insurer might be an option.
However, while Mercury Insurance is financially stable and offers competitive pricing, its negative outlooks from A.M. Best and other ratings agencies, poor customer satisfaction, and high complaints raise red flags.
Mercury Insurance’s products offer compelling value, especially to customers with less-than-ideal credit scores, but it may not be a good first choice. This is especially true for clients who value service quality and claims experience. A sound strategy would be to look at other auto insurers first and see how you can get the best value for their insurance rates.
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