8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 2, 2007

FIRST MERCURY FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)

Delaware	001-33077	38-3164336
(State or other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

29621 Northwestern Hwy PO Box 5096 Southfield, Michigan	48034
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (800) 762-6837

Not Applicable

(Former name or former address if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition

On May 2, 2007, First Mercury Financial Corporation issued a press release announcing its operating results for the three months ended March 31, 2007. A copy of the press release is attached as Exhibit 99.1 to this Form 8-K and incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

99.1 Press Release dated May 2, 2007.

SIGNATURE

Pursuant to the requirements of the Securities Exchange act of 1934, as amended, the company has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

              FIRST MERCURY FINANCIAL CORPORATION              

DATE: May 3, 2007

BY: /s/ John Marazza                                
John Marazza
Executive Vice President, Chief Financial Officer, Treasurer and Corporate Secretary

EXHIBIT INDEX

Exhibit
Number	Description
99.1	Press Release dated May 2, 2007.

EX-99.1

Exhibit 99.1

FOR FURTHER INFORMATION:

AT FIRST MERCURY FINANCIAL:	AT FINANCIAL RELATIONS BOARD:
Allison J. Roelofs	Leslie Loyet
Manager – Corporate Financial Reporting	Investor Inquiries
(248) 213-0430	(312) 640-6672
aroelofs@firstmercury.com	lloyet@frbir.com

FOR IMMEDIATE RELEASE
WEDNESDAY, MAY 2, 2007

FIRST MERCURY FINANCIAL CORPORATION ANNOUNCES
FIRST QUARTER 2007 FINANCIAL RESULTS

SOUTHFIELD, MI – May 2, 2007 – First Mercury Financial Corporation (NYSE: FMR) (“First Mercury” or the “Company”) today announced results for the first quarter ended March 31, 2007.

Highlights for the quarter include:

• Total operating revenues increased 51.6 percent from the first quarter of 2006 to $53.0 million

• Net income of $10.0 million

• Diluted net income per share of $0.55

• Combined ratio of 73.7 percent

• Book value per share of $10.55 compared to $9.98 at December 31, 2006

• Annualized return on average stockholders’ equity of 22.4 percent

“We are pleased with our underwriting results, growth in book value and annualized return on equity for the first quarter, all of which were in line with our expectations”, said Richard H. Smith, chairman and chief executive officer.  Smith added, “Additionally, our business development efforts have produced three new niche general liability underwriting classes all of which became fully operational in April.”

-MORE-

First Mercury Financial Corporation
Add 1

For the three months ended March 31, 2007, premiums produced were $64.3 million, a 7.3 percent increase from premiums produced during the same period in 2006. Premiums produced consists of all of the premiums billed by CoverX®, First Mercury’s licensed wholesale insurance broker, which produces and underwrites all of the Company’s business.

Total operating revenues for the three months ended March 31, 2007 increased 51.6 percent to $53.0 million compared to $35.0 million for the same period of 2006.

First Mercury’s combined ratio for the three months ended March 31, 2007 was 73.7 percent compared with 74.8 percent for the same period in 2006.

Net investment income earned during the three months ended March 31, 2007 was $3.3 million, up 53.2 percent from the same period of 2006.

Net income for the first quarter 2007 was $10.0 million compared to $5.4 million for the same period of 2006. Net income for the three months ended March 31, 2006 includes interest expense of $1.3 million and amortization of debt issuance costs of $0.1 million, net of tax, on senior notes which were issued in August 2005 and repaid in October 2006 with proceeds from First Mercury’s initial public offering.

Smith concluded, “While we have seen some softening in rates, we believe our focus on specialty niches, combined with the new opportunities available to us given our capital structure, position us well for 2007 and beyond.   As such, we reiterate our guidance which is that we expect to deliver annual revenue growth in excess of 20 percent for 2007 and we expect to deliver a return on average stockholders’ equity for 2007 in excess of 20 percent.”

Conference Call Details

The Company will host a conference call on May 3, 2007 at 11:00 a.m. Eastern Time to discuss first quarter results. The call can be accessed live by dialing 800-936-9754 or by visiting the Company’s website at www.firstmercury.com

Investors may access a replay by dialing 877-519-4471, passcode 8701615, which will be available through May 10, 2007. The webcast replay will also be archived in the “Investor Relations” section of the Company’s website.

About First Mercury Financial Corporation

First Mercury Financial Corporation markets and underwrites specialty commercial insurance products, focusing on niche and underserved segments where the Company has underwriting expertise and other competitive advantages.  During the Company’s 33 years of underwriting risks, First Mercury has established CoverX® as a recognized brand among insurance agents and brokers. As primarily an excess and surplus (E&S) lines underwriter, First Mercury has developed the underwriting expertise and cost-efficient infrastructure which has enabled it to effectively underwrite such risks.

-MORE-

First Mercury Financial Corporation
Add 2

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: 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 inability to obtain reinsurance coverage at reasonable prices; the failure of any loss limitations or exclusions or changes in claims or coverage; 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; competition risk; 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; 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.

For more information on the Company, please visit the Company’s website at www.firstmercury.com

Financial Tables Follow...

-MORE-

First Mercury Financial Corporation
Add 3

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

	For the Three Months Ended March 31,
	2007			2006
	(Dollars in thousands, except per share data)
Operating Revenue
Net earned premiums	$	44,929		$	28,529
Commissions and fees		4,657			4,444
Net investment income		3,294			2,150
Net realized gains on investments		135			(153	)
Total Operating Revenues		53,015			34,970
Operating Expenses
Losses and loss adjustment expenses, net		23,954			14,907
Amortization of deferred acquisition expenses		8,739			4,894
Underwriting, agency and other expenses		3,730			4,210
Amortization of intangible assets		307			292
Total Operating Expenses		36,730			24,303
Operating Income		16,285			10,667
Interest Expense		982			2,648
Change in Fair Value of Derivative Instruments		107			(229	)
Income Before Income Taxes		15,196			8,248
Income Taxes		5,229			2,869
Net Income	$	9,967		$	5,379
Net Income Per Share: (1)
Basic	$	0.58		$	1.07
Diluted	$	0.55		$	0.44
Weighted Average Shares Outstanding: (1)
Basic		17,331,901			4,183,479
Diluted		18,183,841			12,291,514
GAAP Underwriting Ratios:
Loss ratio		53.3	%		52.3	%
Expense ratio		20.4	%		22.5	%
Combined ratio		73.7	%		74.8	%

-MORE-

First Mercury Financial Corporation
Add 4

First Mercury Financial Corporation
Condensed Consolidated Balance Sheets
(Unaudited)

	March 31,			December 31,
	2007			2006
	(Unaudited)
ASSETS	(Dollars in thousands, except per share data)
Investments
Debt securities	$	310,466		$	260,323
Equity securities and other		2,986			3,184
Short-term		46,530			34,334
Total Investments		359,982			297,841
Cash and cash equivalents		9,567			14,335
Premiums and reinsurance balances receivable		28,155			46,090
Accrued investment income		3,443			2,931
Accrued profit sharing commissions		8,790			7,735
Reinsurance recoverable on paid and unpaid losses		71,228			69,437
Prepaid reinsurance premiums		25,454			10,377
Deferred acquisition costs		14,448			18,452
Intangible assets, net of accumulated amortization		37,571			37,878
Other assets		8,027			7,857
Total Assets	$	566,665		$	512,933
LIABILITIES AND STOCKHOLDERS’ EQUITY
Loss and loss adjustment expense reserves	$	211,271		$	191,013
Unearned premium reserves		97,943			91,803
Long-term debt		46,394			46,394
Funds held under reinsurance treaties		9,013			—
Reinsurance payable on paid losses		2,840			2,877
Premiums payable to insurance companies		1,776			728
Deferred federal income taxes		271			1,642
Accounts payable, accrued expenses, and other liabilities		14,309			5,738
Total Liabilities		383,817			340,195
Stockholders’ Equity (1)
Common stock, $0.01 par value; authorized 100,000,000 shares; issued and outstanding 17,335,019 and 17,330,831 shares		174			174
Paid-in-capital		153,630			153,600
Accumulated other comprehensive loss		(781	)		(761	)
Retained earnings		30,423			20,323
Treasury stock; 92,500 shares		(598	)		(598	)
Total Stockholders’ Equity		182,848			172,738
Total Liabilities and Stockholders’ Equity	$	566,665		$	512,933

-MORE-

First Mercury Financial Corporation
Add 5

First Mercury Financial Corporation
Summary Financial Data

	Three Months Ended
	March 31,
	2007			2006
	(Dollars in thousands)
Gross Written Premiums:
Direct written premiums	$	59,334		$	55,537
Assumed written premiums		1,266			1,339
Gross written premiums	$	60,600		$	56,876
Net Written Premiums:
Net written premiums	$	34,460		$	27,108
Commissions and Fees:
Insurance underwriting commissions and fees	$	1,872		$	1,431
Insurance services commissions and fees		2,785			3,013
Total commissions and fees	$	4,657		$	4,444
Cash and Cash Equivalents:
Net cash provided by operating activities	$	51,628		$	17,673
Net cash used in investing activities		(56,396	)		(19,029	)
Net cash provided by financing activities		—			244
Net decrease in cash and cash equivalents	$	(4,768	)	$	(1,112	)

FOOTNOTES

(1) Reflects 925 to 1 stock split that occurred on October 16, 2006 for all periods presented.

-###-