First Mercury Financial (FMR)

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WilliamKnecht

First Mercury Financial Corporation (FMFC) is a provider of insurance products and services to the specialty commercial insurance markets focusing on niche and underserved segments. FMFC (NYSE:FMR) is a holding company for its operating subsidiaries. FMFC’s operating subsidiaries are CoverX Corporation (CoverX), First Mercury Insurance Company (FMIC), First Mercury Casualty Company (FMCC), First Mercury Emerald Insurance Services, Inc. (FM Emerald), American Management Corporation (AMC) and American Underwriters Insurance Company (AUIC).

FMFC's CoverX and FM Emerald subsidiaries are licensed wholesale insurance brokers that market, produce and bind the insurance policies for which FMFC retains risk and receives premiums. As wholesale insurance brokers, CoverX and FM Emerald market FMFC insurance policies through a nationwide network of wholesale and retail insurance brokers who then distribute these policies through retail insurance brokers. In addition, CoverX markets a portion of its products through contract underwriters. CoverX and FM Emerald also provide underwriting services with respect to the insurance policies they market in that they review the applications submitted for insurance coverage, decide whether to accept all or part of the coverage requested and determine applicable premiums based on guidelines that FMFC provides. CoverX receives commissions from affiliated insurance companies, reinsurers, and non−affiliated insurers as well as policy fees from wholesale and retail insurance brokers. FMFC participates in the risk on insurance policies sold through CoverX and FM Emerald, generally by directly writing the policies through its insurance subsidiaries and then retaining all or a portion of the risk.

On February 1, 2008, FMFC acquired 100% of the issued and outstanding common stock of American Management Corporation (AMC). AMC is a managing general agency writing primarily commercial lines package policies focused primarily on the niche fuel−related marketplace. AMC distributes these insurance policies through a nationwide distribution system of independent general agencies. AMC underwrites these policies for third party insurance carriers and receives commission income for its services. AMC also provides claims handling and adjustment services for policies produced by AMC and directly written for third parties. In addition, AMC owns and operates American Underwriters Insurance Company (“AUIC”), a single state, non−standard auto insurance company domiciled in the state of Arkansas, and AMC Re, Inc. (“AMC Re”), a captive reinsurer incorporated under the provisions of the laws of Arkansas.

FMFC has entered into a definitive agreement whereby its principal insurance subsidiary, First Mercury Insurance Company, will acquire Valiant Insurance Group, Inc. (Valiant), and its wholly owned property/casualty subsidiaries, Valiant Insurance Company and Valiant Specialty Insurance Company. The transaction is subject to customary closing conditions and regulatory approvals and is anticipated to close in the fourth quarter of 2010.

On June 27, 2008, FMFC sold all of the outstanding capital stock of American Risk Pooling Consultants, Inc. (“ARPCO”).

References

FMR 2009 10-K