First Mercury Financial Corporation Completes Acquisition of Valiant Insurance Group, Inc.

SOUTHFIELD, Mich., Nov. 9, 2010 /PRNewswire-FirstCall/ -- First Mercury Financial Corporation (NYSE: FMR) ("First Mercury" or the "Company") announced today that it has completed the previously announced acquisition of Valiant Insurance Group, Inc., a subsidiary of Ariel Holdings, Ltd. In connection with the closing of the transaction, A.M. Best Co. has affirmed the financial strength ratings of A- (Excellent) of Valiant Insurance Company and Valiant Specialty Insurance Company as members of the First Mercury Group. In addition, the financial size category of Valiant Insurance Company and Valiant Specialty Insurance Company increased to IX.

About First Mercury Financial Corporation

First Mercury Financial Corporation provides insurance products and services primarily to the specialty commercial insurance markets, focusing on niche and underserved segments where we believe that we have underwriting expertise and other competitive advantages. During the Company's 37 years of underwriting risks, First Mercury has developed the underwriting expertise and cost-efficient infrastructure which has enabled us to effectively underwrite such risks. Our risk-taking subsidiaries offer insurance products through our distribution subsidiaries: CoverX®, FM Emerald and AMC, which are recognized brands among insurance producers.

Additional Information

First Mercury has entered into a Merger Agreement to be acquired by Fairfax Financial Holdings Limited. In connection with the proposed transaction, First Mercury will file a proxy statement with the SEC. INVESTORS AND STOCKHOLDERS ARE ADVISED TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER AND THE PARTIES THERETO.

Investors and stockholders may obtain free copies of the proxy statement and other documents filed by First Mercury (when available), at the SEC's Web site at www.sec.gov or the Investor Relations section of First Mercury's Web site at www.firstmercury.com. The proxy statement and such other documents may also be obtained, when available, for free from First Mercury by directing such request to Investor Relations, First Mercury Financial Corporation, 29110 Inkster Road, Suite 100, Southfield, Michigan 48034, Attn:  Edward LaFramboise, Vice President, Finance, telephone: (248) 213-0406.

First Mercury and its directors, executive officers and other members of its management and employees may be deemed to be participants in the solicitation of proxies from First Mercury's stockholders in connection with the proposed transaction. Information concerning the interests of those persons is set forth in First Mercury's proxy statement relating to the 2010 annual stockholder meeting and annual report on Form 10-K for the fiscal year ended December 31, 2009, both filed with the SEC, and will also be set forth in the proxy statement relating to the transaction when it becomes available.

Safe Harbor Statement

This release contains forward-looking statements that relate to future periods and includes statements regarding our anticipated performance. Generally, the words "anticipates," "believes," "expects," "intends," "estimates," "projects," "plans" and similar expressions identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements or industry results to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. These risks, uncertainties and other important factors include, among others: recent and future events and circumstances impacting financial, stock, and capital markets, and the responses to such events by governments and the financial communities; the impact of catastrophic events and the occurrence of significant severe weather conditions on our operating results; our ability to maintain or the lowering or loss of one of our financial or claims-paying ratings; our actual incurred losses exceeding our loss and loss adjustment expense reserves; the failure of reinsurers to meet their obligations; our estimates for accrued profit sharing commissions are based on loss ratio performance and could be adversely impacted if the underlying loss ratios deteriorate; our inability to obtain reinsurance coverage at reasonable prices; the failure of any loss limitations or exclusions or changes in claims or coverage; our ability to successfully integrate acquisitions that we make; our ability to realize anticipated benefits from acquisitions; our lack of long-term operating history in certain specialty classes of insurance; our ability to acquire and retain additional underwriting expertise and capacity; the concentration of our insurance business in relatively few specialty classes; the increasingly competitive property and casualty marketplace; fluctuations and uncertainty within the excess and surplus lines insurance industry; the extensive regulations to which our business is subject and our failure to comply with these regulations; our ability to maintain our risk-based capital at levels required by regulatory authorities; our inability to realize our investment objectives; an economic downturn or other economic conditions adversely affecting our financial position; and the risks identified in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K. Given these uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. We assume no obligation to update or revise them or provide reasons why actual results may differ.

The Company uses the Investor Relations page of its website at www.firstmercury.com to make information available to its investors and the public.

SOURCE First Mercury Financial Corporation