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A.M. Best Places Ratings of First Mercury Financial Corporation and Its Subsidiaries under Review with Positive Implications

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  Published in Business and Finance on Friday, October 29th 2010 at 13:26 GMT by Market Wire
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OLDWICK, N.J.--([ BUSINESS WIRE ])--A.M. Best Co. has placed under review with positive implications the financial strength rating (FSR) of A- (Excellent) and issuer credit ratings (ICR) of aa-a of First Mercury Group (First Mercury)(Chicago, IL) and its members. Concurrently, A.M. Best has placed under review with positive implications the ICR of abbb-a of First Mercurya�s parent holding company, First Mercury Financial Corporation (FMFC) (headquartered in Southfield, MI) (NYSE: FMR). (See below for a detailed listing of the companies.)

"A.M. Best Ratings and the Treatment of Debt."

The rating actions follow the announcement that FMFC and Fairfax Financial Holdings Ltd. (Fairfax) (Toronto, Canada)[TSX: FFH and FFH.U] have entered into a merger agreement whereby Fairfax will acquire all of the outstanding shares of FMFCa�s common stock. The under review status with positive implications reflects the perceived benefit to First Mercury of being ultimately owned by Fairfax, which offers the group greater financial flexibility and resources.

A.M. Best plans to resolve the under review status upon the completion of the transaction, which is expected in the first quarter of 2011, subject to shareholder and regulatory approval.

The FSR of A- (Excellent) and ICRs of aa-a have been placed under review with positive implications for First Mercury Group and its following members:

• First Mercury Insurance Company
• First Mercury Casualty Company
• American Underwriters Insurance Company

The principal methodology used in determining these ratings is [ Besta�s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition ], which provides a comprehensive explanation of A.M. Besta�s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: aRisk Management and the Rating Process for Insurance Companiesa; aUnderstanding BCAR for Property/Casualty Insurersa; and aA.M. Best Ratings and the Treatment of Debt.a Methodologies can be found at [ www.ambest.com/ratings/methodology ].

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit [ www.ambest.com ].