Best: No Change in First Mercury Ratings from Valiant Buy

July 12, 2010

A.M. Best Co. has commented that the financial strength rating of ‘A-‘ (Excellent) and issuer credit ratings (ICR) of “a-” of the Chicago-based First Mercury Group and its members and the ICR of “bbb-” of the parent holding company, First Mercury Financial Corporation (FMFC), headquartered in Southfield, Mich., are unchanged. The outlook for these ratings is positive.

Best made the comment following the announcement that FMFC has entered into a definitive agreement whereby its principal insurance subsidiary, First Mercury Insurance Company, will acquire Valiant Insurance Group, Inc. and its wholly owned property/casualty subsidiaries, Valiant Insurance Company and Valiant Specialty Insurance Company from Ariel Holdings, Ltd. (Ariel). [See IJ web site – ].

The transaction is subject to customary closing conditions and regulatory approvals and is anticipated to close in the fourth quarter of 2010.

Under the terms of the agreement, FMFC will pay an amount equal to Valiant’s tangible book value, which is anticipated to be approximately $55 million at closing. As part of the agreement, Ariel has agreed to provide FMFC with full protection related to the run off of Valiant’s net loss and loss adjustment expense reserves and unearned premium reserves on the closing date balance sheet.

The classes of business related to Valiant’s existing underwriting platform to be retained by FMFC include primary and excess casualty, professional and management liability and marine. Classes of Valiant business that are not consistent with FMFC’s specialty niche underwriting focus will be discontinued.

The FSR of A- (Excellent) and ICRs of “a-” are unchanged for First Mercury Group and its following members: First Mercury Insurance Company, First Mercury Casualty Company and American Underwriters Insurance Company.

Source: A.M. Best

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