929186--3/16/2010--FIRST_MERCURY_FINANCIAL

related topics

{loss, insurance, financial}

{stock, price, share}

{debt, indebtedness, cash}

{personnel, key, retain}

{condition, economic, financial}

{regulation, government, change}

{acquisition, growth, future}

{stock, price, operating}

{financial, litigation, operation}

{system, service, information}

{tax, income, asset}

{operation, natural, condition}

{interest, director, officer}

{loan, real, estate}

Any downgrade in the A.M. Best rating of FMIC would prevent us from successfully engaging in direct insurance writing or obtaining adequate reinsurance on competitive terms, which would lead to a decrease in revenue and net income. Our actual incurred losses may be greater than our loss and loss adjustment expense reserves, which could have a material adverse effect on our financial condition or our results of operations. We bear credit risk with respect to our reinsurers, and if any reinsurer fails to pay us, or fails to pay us on a timely basis, we could experience losses. We may not be able to obtain adequate reinsurance coverage or reinsurance on acceptable terms. Severe weather conditions and other catastrophes may result in an increase in the number and amount of claims experienced by our insureds. The failure of any of the loss limitations or exclusions we employ or changes in other claim or coverage issues could have a material adverse effect on our financial condition or our results of operations. The lack of long-term operating history and proprietary data on claims results for relatively new specialty classes may cause our future results to be less predictable. Our growth may be dependent upon our successful acquisition and retention of additional underwriting expertise. We may require additional capital in the future, which may not be available or may be available only on unfavorable terms. Our business could be adversely affected by the loss of one or more key employees. Our insurance business is concentrated in relatively few specialty classes. The loss of one or more of our top wholesale brokers could have a material adverse effect on our financial condition or our results of operations. The loss of one of the managing general agency relationships with AMC s unaffiliated insurance carriers could have a material adverse effect on our financial condition or our results of operations. Our estimates for accrued profit sharing commissions are based on loss ratio performance and could be reduced if the underlying loss ratios deteriorate. We operate in a highly competitive environment, which makes it more difficult for us to attract and retain business. Results in the insurance industry, and specifically the E S lines insurance market, are subject to fluctuations and uncertainty which may adversely affect our ability to write policies. We are subject to extensive regulation, which may adversely affect our ability to achieve our business objectives. In addition, if we fail to comply with these regulations, we may be subject to penalties, including fines and suspensions, which may adversely affect our financial condition and results of operations. If we have insufficient risk-based capital, our ability to conduct our business could be adversely affected. If our IRIS ratios are outside the usual range, our business could be adversely affected. If we are unable to realize our investment objectives, our financial condition may be adversely affected. Our valuations of many of our financial instruments include methodologies, estimations and assumptions that are subject to differing interpretations and could result in changes to investment valuations that may materially adversely affect our results of operations and financial condition. Evaluation of available-for-sale securities for other than temporary impairment involves subjective determinations and could materially impact our results of operations. Losses due to nonperformance or defaults by others, including issuers of investment securities (which include structured securities such as commercial mortgage-backed securities and residential mortgage-backed securities or other high yielding bonds) or reinsurance and derivative instrument counterparties, could have a material adverse effect on the value of our investments, results of operations, financial condition and cash flows. Our directors and executive officers own a large percentage of our common stock, which allows them to effectively control matters requiring stockholder approval. We rely on our information technology and telecommunication systems, and the failure of these systems could adversely affect our business. Our ability to service our debt obligations would be harmed if we fail to comply with the financial and other covenants in our credit facility. The Company has received a temporary waiver of any event of default as of March 31, 2010 related to the fixed charge coverage ratio covenant in the Company s credit agreement through May 1, 2010. Risks Related to our Common Stock The price of our shares of common stock may be volatile. Our results of operations and revenues may fluctuate as a result of many factors, including cyclical changes in the insurance industry, which may cause the price of our shares to decline. If a substantial number of our shares of common stock become available for sale and are sold in a short period of time, the market price of our shares of common stock could decline. Our ability to pay cash dividends on our common stock to our stockholders dependent on our results of operations, financial condition, and other factors and any determination to pay cash dividends in the future will be at the discretion of our board of directors.

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929186--3/16/2010--FIRST_MERCURY_FINANCIAL_CORP