William Blair & Company Initiates Coverage of First Mercury Financial Corporation With Outperform Rating

Business Wire, Jan 18, 2007

CHICAGO -- William Blair & Company initiated research coverage of First Mercury Financial Corporation (NYSE:FMR) ($21.81), a specialty commercial property-casualty insurance underwriter based in Southfield, Michigan, with an Outperform rating and company profile of Aggressive Growth.

Analyst Mark Lane estimated that the company, which completed its initial public offering on October 17, 2006, at $17.00 per share, would earn $1.45 per share in 2006 (includes pro forma share count for the IPO and excludes net realized investment gains/losses), $2.15 per share in 2007, and $2.65 per share in 2008.

"We believe First Mercury represents one of the few growth companies in the commercial property-casualty insurance space," Lane said. "The company has been able to build an unusually profitable casualty insurance franchise by successfully leveraging its expertise and dominant market position serving the security industry into other complementary specialty casualty markets."

"Capital from the recent IPO and trust preferred security offering should enable First Mercury to more aggressively expand its other specialty lines business geographically, as well as enter additional specialty casualty markets," he added. "The company's IPO has also increased its visibility and opportunities and allowed the company to continue to attract underwriting talent--we would not be surprised if the company made an opportunistic acquisition in the near term."

William Blair & Company, L.L.C. has received compensation for investment banking services from the company within the past 12 months, or expects to receive or intends to seek compensation for investment banking services in the next 3 months.

William Blair & Company, L.L.C. was a manager or co-manager of a public offering of equity securities within the prior 12 months.

William Blair & Company, L.L.C. (www.williamblair.com) is a Chicago-based investment firm offering investment banking, asset management, equity research, institutional and private brokerage, and private capital to individual, institutional, and issuing clients. Since 1935, we have been committed to helping clients achieve their financial objectives. As an independent, employee-owned firm, our philosophy is to serve our clients' interests first and foremost.

For important disclosures and information regarding the firm's rating system, valuation methods and potential conflicts of interest, please visit: http://www.williamblair.com/Pages/news_story_dept.asp?uid=1142&depID=4

Additional information is available upon request.