A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of “aa-” of insurance entities within the Mercury Casualty Group (Mercury) (Los Angeles, CA). Additionally, A.M. Best has affirmed the FSR of A- (Excellent) and ICRs of “a-” of the insurance companies within the American Mercury Insurance Group (AMI) (Oklahoma City, OK). Concurrently, A.M. Best has affirmed the ICR of “a-” of Mercury’s and AMI’s parent, Mercury General Corporation (MGC) (Los Angeles, CA) [NYSE: MCY]. The outlook for all ratings is stable. (See below for a detailed listing of the companies and ratings.) The affirmations reflect Mercury’s adequate capitalization and consistent and sustained earnings that have been achieved through strong independent agency relationships; historically strong investment income; financial flexibility of its parent, MGC; and favorable underwriting results. These positive rating factors are partially offset by the group's business concentration in California, moderate adverse loss reserve development, weakened capital position within its lead insurer, Mercury Casualty Company (MCC), slowing investment portfolio performance as well as its dividending patterns to its shareholders that dampen surplus growth. Mercury's adequate capital position is derived from its historically profitable underwriting performance and conservative investment risk profile, which has always greatly supplemented underwriting profits or covered minor underwriting losses. These factors are aided by the group's low dependence on reinsurance. The group's capitalization was historically supported by solid operating earnings, somewhat offset by dividend payments to MGC. With the repayment of MGC’s $125,000,000 of outstanding debt, which came due in 2011 and was retired, MCC's capital base was impacted, reducing the company’s ability to withstand further capital stresses. Despite this, the group benefits from the financial flexibility of its parent due to its modest financial leverage and access to capital markets. The group maintains moderate catastrophe exposure, which is located in MCC. The group leverages technology to enhance operating efficiency, renewal persistency and customer satisfaction. Mercury maintains a sustainable competitive advantage within its core personal auto segment that includes pricing, risk classification expertise and aggressive claims management practices.