Exhibit 99.1

FOR FURTHER INFORMATION:

AT FIRST MERCURY FINANCIAL CORPORATION:
Edward A. LaFramboise
Vice President — Finance
(248) 213-0406
elaframboise@firstmercury.com

FOR IMMEDIATE RELEASE
MONDAY, AUGUST 2, 2010

FIRST MERCURY FINANCIAL CORPORATION ANNOUNCES
SECOND QUARTER 2010 FINANCIAL RESULTS

SOUTHFIELD, MI — August 2, 2010 — First Mercury Financial Corporation (NYSE: FMR) (“First Mercury” or the “Company”) today announced results for the second quarter ended June 30, 2010.

Highlights for the second quarter 2010 include:

• Book value per share of $16.75

• Net income of $4.1 million, or $0.23 per diluted share

• Operating net income of $6.2 million, or $0.35 per diluted share

• Net investment income increase of 18.0 percent

• A.M. Best revised outlook for the Company’s insurance subsidiaries to positive from stable

• Announced definitive agreement to acquire Valiant Insurance Group, Inc. (“Valiant”) for tangible book value as previously disclosed

• Fifth consecutive quarterly dividend of $0.025 per share

“We maintained underwriting discipline in the face of competitive market conditions while modestly increasing our gross written premiums during the quarter,” said Richard H. Smith, Chairman, President and Chief Executive Officer. “We continued to execute our diversification strategy through the acquisition of Valiant which provides us with an attractive opportunity to gain admitted licensing, expand our underwriting resources in select specialty classes of business and increase our New York presence. We intend to retain Valiant business that is consistent with our specialty niche focus and cost structure,” Smith concluded.

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Written and Earned Premium

For the three months ended June 30, 2010, gross written premiums were $84.1 million, a 2.0 percent increase from the gross written premiums during the same period in 2009. For the six months ended June 30, 2010, gross written premiums were $167.9 million, a 4.7 percent increase from the gross written premiums during the same period in 2009.

Net earned premiums during the three months ended June 30, 2010 were $51.5 million, a 0.1 percent increase from the same period of 2009. Net earned premiums during the six months ended June 30, 2010 were $103.2 million, a 0.8 percent decrease from the same period of 2009.

There were no gross written or net earned premiums from assumed retroactive reinsurance transactions during the three months ended June 30, 2010. There were $3.3 million of gross written and net earned premiums from assumed retroactive reinsurance transactions during the six months ended June 30, 2010.

Commissions and Fees

Commissions and fees during the three months ended June 30, 2010 were $7.9 million, a 18.0 percent decrease from the same period of 2009. Commissions and fees during the six months ended June 30, 2010 were $15.7 million, a 4.9 percent decrease from the same period of 2009. The decrease for the three and six months ended June 30, 2010 compared to the same periods of 2009 is primarily due to a contingent commission adjustment of $1.3 million recorded during the three and six months ended June 30, 2009 related to our insurance services business.

Investments

Cash and investments were $771.5 million at June 30, 2010. The Company recorded $6.3 million of pretax net unrealized gains on its available for sale investment portfolio during the three months ended June 30, 2010. For the six months ended June 30, 2010, pretax net unrealized gains on its available for sale investment portfolio were $12.1 million. The investment portfolio’s taxable equivalent net total returns for the three and six months ended June 30, 2010 were 1.9 and 4.4 percent, respectively. The annualized taxable equivalent yield on total investments (net of investment expenses) was 5.3 percent at both June 30, 2010 and 2009.

Losses and Loss Adjustment Expenses

During the three and six months ended June 30, 2010, there was no development of prior years’ loss and loss adjustment expense reserves. For the three and six months ended June 30, 2009, there were $3.6 million and $4.4 million, respectively, of favorable development of prior years’ loss and loss adjustment expense reserves.

Underwriting, Agency and Other Expenses

During the three and six months ended June 30, 2010, the Company recorded $1.1 million of acquisition-related transaction costs in underwriting, agency and other expenses. These expenses were excluded from the calculation of the Company’s GAAP underwriting expense ratio for the three and six months ended June 30, 2010.

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Capital Management

As of today, the Company has not repurchased any shares under its Share Repurchase Program, which expires August 20, 2010. The Company paid a cash dividend of $0.025 per share on June 30, 2010. This represents the Company’s fifth consecutive quarterly dividend of $0.025 per share. As previously disclosed, the Company paid a $2.00 per share special cash dividend on March 31, 2010. This special dividend when combined with our share repurchases in 2008 and 2009 and our regular dividends resulted in $56.5 million of capital returned to shareholders since August of 2008.

Valiant Acquisition

As previously disclosed, on July 1, 2010, the Company announced that it entered into a definitive agreement whereby its principal insurance subsidiary, First Mercury Insurance Company, will acquire Valiant, a subsidiary of Ariel Holdings, Ltd. (“Ariel”), for an amount equal to Valiant’s tangible book value, which is anticipated to be approximately $55 million at closing. Under the terms of the agreement, Ariel has agreed to provide First Mercury with full protection related to Valiant’s net loss and loss adjustment expense reserves and unearned premium reserves reflected on the closing date balance sheet. The transaction is subject to customary closing conditions and regulatory approvals and is anticipated to close in the fourth quarter of 2010.

The components of Valiant’s existing underwriting platform to be retained by First Mercury include primary and excess casualty, professional and management liability and marine classes of business. In the twelve months following the closing of the transaction, First Mercury anticipates that Valiant will write approximately $50 to $60 million of gross written premiums and expects Valiant to operate at a net GAAP underwriting expense ratio that is consistent with the Company’s overall net GAAP underwriting expense ratio. Consistent with past practice, First Mercury will prudently use reinsurance on these newer lines of business. If the transaction closes in the fourth quarter of 2010, the Company anticipates recognizing a gain from the transaction with a corresponding increase in book value per share of between $0.56 and $0.73, based on the shares outstanding as of June 30, 2010, related to the value of Valiant’s insurance company licenses and tax net operating loss carry-forwards. First Mercury does not expect the transaction to have a material effect on 2010 earnings and expects the transaction to be modestly accretive to earnings in 2011.

Other

The Company recorded a pretax restructuring charge during the first quarter of 2010 of $5.0 million, or 4.9 percentage points of the expense ratio for the six months ended June 30, 2010. There was no restructuring charge recorded during the three months ended June 30, 2010.

Conference Call Details

The Company will host a conference call on August 3, 2010 at 11:00 a.m. Eastern Time to discuss second quarter results. The call can be accessed live by dialing 877-407-0789 or by visiting the Company’s website at www.firstmercury.com.

Investors may access a replay by dialing 877-870-5176, entering conference ID# 353967, which will be available through August 10, 2010. The webcast replay will also be archived in the “Investor Relations” section of the Company’s website.

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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.

Non-GAAP Financial Measures

Operating net income and operating net income per share are non-GAAP financial measures, and management believes that investors’ understanding of core operating performance is enhanced by First Mercury’s disclosure of these financial measures. Operating net income consists of net income adjusted to exclude the impact of net realized gains (losses) on investments, other-than-temporary impairment losses on investments, the change in fair value of derivative instruments, restructuring charges, acquisition-related transaction costs, and taxes related to these adjustments. Definitions of these items may not be comparable to the definitions used by other companies. Net income and net income per share are the GAAP financial measures that are most directly comparable to operating net income and operating net income per share.

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.

Financial Tables Follow...

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First Mercury Financial Corporation
Condensed Consolidated Statements of Income
(Unaudited)

	Three Months Ended									Six Months Ended
	June 30,						%			June 30,						%
	2010			2009			Change			2010			2009			Change
	(Dollars in thousands, except share and per share data)
Operating Revenue
Net earned premiums	$	51,504		$	51,432			0.1	%	$	103,177		$	104,027			-0.8	%
Commissions and fees		7,857			9,577			-18.0	%		15,659			16,471			-4.9	%
Net investment income		8,416			7,132			18.0	%		17,085			13,566			25.9	%
Net realized gains (losses) on investments		(1,502	)		9,644			-115.6	%		2,683			11,437			76.5	%
Other-than-temporary impairment losses on investments:
Total losses		(332	)		(832	)		-60.1	%		(1,279	)		(869	)		47.2	%
Portion of losses recognized in accumulated other comprehensive income		293			735			-60.1	%		735			735			0.0	%
Net impairment losses recognized in earnings		(39	)		(97	)		-59.8	%		(544	)		(134	)		306.0	%
Total Operating Revenues		66,236			77,688			-14.7	%		138,060			145,367			-5.0	%
Operating Expenses
Losses and loss adjustment expenses, net		31,572			35,463			-11.0	%		65,584			65,956			-0.6	%
Amortization of deferred acquisition expenses		13,611			13,600			0.1	%		26,754			26,930			-0.7	%
Underwriting, agency and other expenses		12,696			9,526			33.3	%		23,857			18,750			27.2	%
Amortization of intangible assets		516			575			-10.3	%		1,032			1,149			-10.2	%
Restructuring		—			—			—			5,018			—			100.0	%
Total Operating Expenses		58,395			59,164			-1.3	%		122,245			112,785			8.4	%
Operating Income		7,841			18,524			-57.7	%		15,815			32,582			-51.5	%
Interest Expense		1,542			1,417			8.8	%		2,928			2,833			3.4	%
Change in Fair Value of Derivative Instruments		—			(123	)		100.0	%		—			(230	)		100.0	%
Income Before Income Taxes		6,299			17,230			-63.4	%		12,887			29,979			-57.0	%
Income Taxes		2,154			5,621			-61.7	%		3,529			9,689			-63.6	%
Net Income	$	4,145		$	11,609			-64.3	%	$	9,358		$	20,290			-53.9	%
Net Income Per Share:
Basic	$	0.23		$	0.65					$	0.53		$	1.14
Diluted	$	0.23		$	0.64					$	0.53		$	1.11
Weighted Average Shares Outstanding:
Basic		17,451,657			17,700,272						17,279,391			17,737,708
Diluted		17,465,715			18,042,484						17,412,836			18,075,668
GAAP Underwriting Ratios:
Loss ratio		61.3	%		69.0	%		-7.7	Pts.		63.6	%		63.4	%		0.2	Pts.
Expense ratio		35.2	%		30.9	%		4.3	Pts.		39.2	%		30.6	%		8.6	Pts.
Combined ratio		96.5	%		99.9	%		-3.4	Pts.		102.8	%		94.0	%		8.8	Pts.

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First Mercury Financial Corporation
Condensed Consolidated Balance Sheets
(Unaudited)

	June 30,			December 31,
	2010			2009
	(Dollars in thousands,
	except share and per share data)
ASSETS
Investments
Debt securities	$	686,705		$	648,522
Equity securities and other		38,294			38,752
Short-term		23,299			12,216
Total Investments		748,298			699,490
Cash and cash equivalents		23,188			14,275
Premiums and reinsurance balances receivable		56,133			78,544
Accrued investment income		6,581			6,248
Accrued profit sharing commissions		14,588			14,661
Reinsurance recoverable on paid and unpaid losses		192,646			172,711
Prepaid reinsurance premiums		56,931			57,374
Deferred acquisition costs		25,461			25,654
Intangible assets, net of accumulated amortization		36,072			37,104
Goodwill		25,483			25,483
Other assets		25,529			26,049
Total Assets	$	1,210,910		$	1,157,593
LIABILITIES AND STOCKHOLDERS’ EQUITY
Loss and loss adjustment expense reserves	$	527,042		$	488,444
Unearned premium reserves		149,271			146,773
Long-term debt		67,013			67,013
Line of credit		30,000			4,000
Funds held under reinsurance treaties		77,866			71,661
Premiums payable to insurance companies		28,523			31,167
Reinsurance payable on paid losses		2,499			958
Deferred federal income taxes		13,404			13,844
Accounts payable, accrued expenses, and other liabilities		17,930			17,649
Total Liabilities		913,548			841,509
Stockholders’ Equity
Common stock, $0.01 par value; authorized 100,000,000 shares; issued and outstanding 17,757,859 and 17,181,106 shares		178			172
Paid-in-capital		156,898			154,417
Accumulated other comprehensive income		21,845			16,256
Retained earnings		120,289			147,087
Treasury stock; 130,600 and 130,600 shares		(1,848	)		(1,848	)
Total Stockholders’ Equity		297,362			316,084
Total Liabilities and Stockholders’ Equity	$	1,210,910		$	1,157,593
Book Value Per Share	$	16.75		$	18.40
Tangible Book Value Per Share	$	13.97		$	15.49

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First Mercury Financial Corporation
Summary Financial Data

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2010			2009			2010			2009
	(Dollars in thousands, except per share data)
Gross Written Premiums:
Primary general liability	$	53,690		$	56,153		$	102,987		$	106,899
Excess/Umbrella casualty		10,949			8,509			22,116			17,155
Professional liability		7,641			7,338			17,889			15,671
Commercial property		9,999			8,778			16,610			16,348
Other		1,855			1,743			8,266			4,326
Gross written premiums	$	84,134		$	82,521		$	167,868		$	160,399
Net Written Premiums:
Primary general liability	$	36,564		$	38,309		$	70,988		$	72,647
Excess/Umbrella casualty		2,154			906			3,973			1,914
Professional liability		4,549			5,610			10,636			12,030
Commercial property		8,381			6,874			12,222			12,350
Other		1,855			1,743			8,266			4,326
Net written premiums	$	53,503		$	53,442		$	106,085		$	103,267
Commissions and Fees:
Insurance underwriting commissions and fees	$	1,320		$	1,360		$	2,789		$	2,717
Insurance services commissions and fees		6,537			8,217			12,870			13,754
Total commissions and fees	$	7,857		$	9,577		$	15,659		$	16,471
Cash and Cash Equivalents:
Net cash provided by operating activities	$	1,109		$	32,428		$	54,230		$	58,125
Net cash provided by (used in) investing activities		7,056			(17,111	)		(36,264	)		(60,056	)
Net cash used in financing activities		(444	)		(6,328	)		(9,053	)		(6,328	)
Net increase (decrease) in cash and cash equivalents	$	7,721		$	8,989		$	8,913		$	(8,259	)
Return on Equity: (1)
Net income		5.6	%		16.5	%		6.2	%		14.8	%
Operating net income		8.4	%		7.6	%		8.1	%		9.3	%
Operating Net Income: (3)
Net income	$	4,145		$	11,609		$	9,358		$	20,290
Adjust for Net realized (gains) and losses on investments, net of tax		976			(6,269	)		(1,744	)		(7,434	)
Adjust for Other-than-temporary impairment losses on investments, net of tax		25			63			354			87
Adjust for Change in fair value of derivative instruments, net of tax		—			(80	)		—			(150	)
Adjust for Restructuring, net of tax		—			—			3,262			—
Adjust for Acquisition-related transaction costs, net of tax		1,033			—			1,033			—
Operating net income	$	6,179		$	5,323		$	12,263		$	12,793
Operating Net Income Per Share: (3)
Diluted	$	0.35		$	0.30		$	0.69		$	0.71

	June 30,			December 31,
	2010			2009
Tangible Stockholders’ Equity: (2)
Total stockholders’ equity	$	297,362		$	316,084
Intangible assets, net		(36,072	)		(37,104	)
Deferred tax liability — intangible assets, net		12,251			12,613
Goodwill		(25,483	)		(25,483	)
Tangible stockholders’ equity	$	248,058		$	266,110

(1)	Return on equity represents net income and operating net income expressed on an annualized basis as a percentage of average stockholders’ equity.
(2)	Tangible stockholders’ equity is total stockholders’ equity excluding the value of intangible assets, net of accumulated amortization, goodwill, and the deferred tax liability related to intangible assets.
(3)	See discussion of use of non-GAAP financial measures above. $0.9 million of the $1.1 million of acquisition-related transaction costs were not deemed deductible for tax purposes. A tax rate of 35 percent was used for those acquisition- related transaction costs that were tax deductible.

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