Mercury General Corporation Announces Second Quarter Results and Declares Quarterly Dividend

Consolidated Highlights

Three Months Ended June 30,

Change

Six Months Ended June 30,

Change

2025

2024

$

%

2025

2024

$

%

(000's except per-share amounts and ratios)

Net premiums earned ⁽²⁾

$  1,366,738

$  1,236,024

$   130,714

10.6

$  2,649,808

$  2,402,703

$   247,105

10.3

Net premiums written ^{(1) (2)} 

$  1,480,807

$  1,355,460

$   125,347

9.2

$  2,795,188

$  2,640,444

$   154,744

5.9

Net realized investment gains, net of tax ⁽³⁾

$      18,549

$        2,290

$     16,259

710.0

$      36,973

$      32,461

$       4,512

13.9

Net income

$    166,472

$      62,568

$   103,904

166.1

$      58,145

$    136,030

$    (77,885)

(57.3)

Net income per diluted share

$          3.01

$          1.13

$         1.88

166.4

$          1.05

$          2.46

$        (1.41)

(57.3)

Operating income ⁽¹⁾

$    147,923

$      60,278

$     87,645

145.4

$      21,172

$    103,569

$    (82,397)

(79.6)

Operating income per diluted share ⁽¹⁾

$          2.67

$          1.09

$         1.58

145.0

$          0.38

$          1.87

$        (1.49)

(79.7)

Catastrophe losses net of reinsurance ⁽⁴⁾

$      13,000

$    125,000

$  (112,000)

(89.6)

$    460,000

$    197,000

$   263,000

133.5

Combined ratio ⁽⁵⁾

92.5 %

98.9 %

—

      (6.4)   pts

105.4 %

99.9 %

—

     5.5      pts

⁽¹⁾   

These measures are not based on U.S. generally accepted accounting principles ("GAAP"), are defined in "Information Regarding GAAP and Non-GAAP Measures" and are reconciled to the most directly comparable GAAP measures in "Supplemental Schedules."

⁽²⁾     

Net premiums earned for the three months ended June 30, 2025 includes $51 million of increased ceded premiums earned. The Company paid and recorded $101 million of reinstatement premiums in the first quarter of 2025 to reinstate the fully exhausted reinsurance coverage layers of its catastrophe reinsurance treaty ending June 30, 2025 following the Palisades and Eaton wildfires in January 2025, $50 million of which was earned in the first quarter of 2025 and $51 million in the second quarter of 2025. Both net premiums earned and net premiums written for the six months ended June 30, 2025 include $101 million of increased ceded premiums due to the reinstatement premiums noted above.   

⁽³⁾  

Net realized investment gains before tax was $23 million and $3 million for the three months ended June 30, 2025 and 2024, respectively, and $47 million and $41 million for the six months ended June 30, 2025 and 2024, respectively. The changes in fair value of the Company's investments are recorded as part of net realized investment gains or losses in its consolidated statements of operations due to the adoption of the fair value option for its investments as permitted under GAAP.

⁽⁴⁾     

The majority of 2025 catastrophe losses resulted from the Palisades and Eaton wildfires in California and severe storms in Texas and Oklahoma. The majority of 2024 catastrophe losses resulted from tornadoes, hailstorms and convective storms in Texas and Oklahoma and winter storms and rainstorms in California. Catastrophe losses net of reinsurance for the three and six months ended June 30, 2025 was reduced by approximately $50 million and $575 million, respectively, from subrogation recorded on the Palisades and Eaton wildfires. 

⁽⁵⁾         

The Company experienced unfavorable development of approximately $4 million and $14 million on prior accident years' loss and loss adjustment expense reserves for the three months ended June 30, 2025 and 2024, respectively, and favorable development of approximately $47 million and unfavorable development of approximately $8 million on prior accident years' loss and loss adjustment expense reserves for the six months ended June 30, 2025 and 2024, respectively. The year-to-date favorable development in 2025 was primarily attributable to lower than estimated losses and loss adjustment expenses in the private passenger automobile line of insurance business, and the homeowners line of insurance business, including favorable development on prior years' catastrophe losses. The year-to-date unfavorable development in 2024 was primarily attributable to higher than estimated losses and loss adjustment expenses in the commercial automobile and commercial property lines of insurance business and catastrophe losses, partially offset by favorable development in the private passenger automobile line of insurance business.

Investment Results

Three Months Ended June 30,

Six Months Ended June 30,

2025

2024

2025

2024

(000's except average annual yield)

Average invested assets at cost ⁽¹⁾

$   5,703,599

$   5,536,170

$   5,686,645

$   5,450,760

Net investment income ^{(2) (3)}

     Before income taxes

$        78,759

$        68,970

$      160,238

$      133,989

     After income taxes

$        66,021

$        57,966

$      133,872

$      112,814

Average annual yield on investments ^{(2) (3)}

     Before income taxes

4.7 %

4.5 %

4.7 %

4.5 %

     After income taxes

3.9 %

3.8 %

4.0 %

3.8 %

⁽¹⁾

Fixed maturities and short-term bonds at amortized cost; equities and other short-term investments at cost. Average invested assets at cost are based on the monthly amortized cost of the invested assets excluding cash for each period.

⁽²⁾

Net investment income includes interest income earned on cash of approximately $12.5 million and $6.2 million ($9.9 million and $4.9 million after tax) for the three months ended June 30, 2025 and 2024, respectively, and approximately $25.6 million and $11.9 million ($20.2 million and $9.4 million after tax) for the six months ended June 30, 2025 and 2024, respectively. Average annual yield on investments does not include interest income earned on cash.

⁽³⁾

Higher net investment income before and after income taxes for the three and six months ended June 30, 2025 compared to the corresponding periods in 2024 resulted largely from higher average yield combined with higher average invested assets and cash. Average annual yield on investments before and after income taxes for the three and six months ended June 30, 2025 increased compared to the corresponding periods in 2024, primarily due to the sale of certain low-yielding investments with a total fair value of approximately $600 million in January 2025 to provide ample liquidity for claims resulting from the Palisades and Eaton wildfires, combined with the replacement of certain lower yielding investments with higher yielding long-term investments, as a result of recent increases in certain long-term market interest rates.

For the Six
Months Ended
June 30, 2025

For the Three
Months Ended
March 31, 2025

(Amounts in thousands)

Gross losses and loss adjustment expenses

$       2,153,000

$       2,149,000

Subrogation recoverable - Eaton fire ^{(1) ***}

(528,000)

(525,000)

Subrogation recovered and recoverable - Palisades fire ^{(2) ***}

(46,500)

—

Reinsurance recovered and recoverable ⁽³⁾

(1,293,500)

(1,293,500)

        Net catastrophe losses and loss adjustment expenses on Eaton and Palisades fires before Fair Plan

$          285,000

$          330,500

Company's share of Fair Plan losses and loss adjustment expenses ⁽⁴⁾

$            99,000

$          108,500

Recoupable portion of Fair Plan losses and loss adjustment expenses ⁽⁵⁾

(25,000)

(25,000)

 Net Fair Plan losses and loss adjustment expenses

$            74,000

$            83,500

Net losses and loss adjustment expenses on Eaton and Palisades fires

$          359,000

$          414,000

__________

⁽¹⁾         

The Company is actively pursuing subrogation against Southern California Edison ("SCE") on the Eaton fire. The Company recorded approximately $528 million in estimated subrogation recoveries, or approximately 55% of its estimated ultimate losses on the Eaton fire, as an offset against loss and loss adjustment expense reserves in its consolidated balance sheet at June 30, 2025, and thereby reduced losses and loss adjustment expenses by the same amount in its consolidated statements of operations for the six months ended June 30, 2025. Although SCE has not admitted that its equipment caused the Eaton fire, significant evidence indicates that SCE's equipment was the cause of the Eaton fire. In addition, SCE has disclosed that it is probable that SCE will incur material losses from the Eaton fire. For utility caused California wildfires occurring since 2017, the utility companies, including SCE, have paid out average amounts equal to over 60% of the losses incurred with a range as low as 55% to over 70%. The Company believes that SCE has the wherewithal to settle the subrogation claims on the Eaton fire in a similar range of settlement amounts as on the recent past wildfires. SCE also has access to the California Wildfire Fund which provides additional funding to reimburse member utilities to pay wildfire claims. Based on the grounds described above, including the history of settlement payouts on prior wildfires by SCE and other utility companies in similar situations where the utility equipment caused the wildfires and such companies settled the subrogation claims without admitting fault, the Company believes $528 million is a reasonable estimate of probable recovery on the Eaton fire. 

⁽²⁾      

In June 2025, the Company sold its subrogation rights on the Palisades fire to a third party for a guaranteed percentage of losses incurred plus a share in the amount recovered above a certain threshold ("Upside Recovery'). The recovery amount from the guaranteed percentage of losses is approximately $47 million, with $27 million received as of June 30, 2025. The remaining balance of approximately $20 million at June 30, 2025 will be settled each quarter based on the amount of claims payments the Company makes subsequent to the previous settlement date. The Company recorded the total sale price of approximately $47 million as an offset against losses and loss adjustment expenses in its consolidated statements of operations for the six months ended June 30, 2025. The Company did not record an amount for the potential Upside Recovery.

⁽³⁾      

The Company's catastrophe reinsurance program for the treaty year ended June 30, 2025 provides approximately $1,290 million of limits on a per occurrence basis after covered catastrophe losses exceed the Company's retention of $150 million. It also allows the Company to consider catastrophe events that occur within a 150-mile radius as a single occurrence or separate occurrences for reinsurance purposes. The Company treated the Palisades and Eaton wildfires as one event for reinsurance purposes exhausting the full $1,290 million of limits and paid reinstatement premiums of approximately $101 million. The $1,290 million of limits used for the Palisades and Eaton wildfires was reduced by $6.5 million for ineligible parametric coverage. The Company also utilized $10 million from a separate property excess of loss reinsurance treaty making the total reinsurance used for the Palisades and Eaton wildfires approximately $1,294 million.

⁽⁴⁾      

The Company is a member of the California FAIR Plan, the state's fire insurer of last resort. To the extent the FAIR Plan has losses exceeding its capital and reinsurance coverage, the FAIR Plan can assess its member companies for the shortfall based on each company's California market share. The FAIR Plan had significant losses from the Palisades and Eaton wildfires, and the Company's share of the FAIR Plan losses from the Palisades and Eaton wildfires was approximately $99 million (an amount based on information provided to the Company directly from the FAIR Plan), which was recorded as part of the Company's losses from the Palisades and Eaton wildfires in its consolidated statements of operations for the six months ended June 30, 2025.

⁽⁵⁾     

The FAIR Plan assessed the Company $50 million to strengthen the FAIR Plan's capital position following the Palisades and Eaton wildfires in the first quarter of 2025. The California DOI allows for recoupment of 50% or $25 million of the $50 million assessment via a temporary surcharge to the Company's policyholders. The Company has filed with the California DOI to begin recouping the $25 million, which partially offset the Company's share of the FAIR Plan's losses of $99 million. Accordingly, the Company recorded a net loss of $74 million for its share of the FAIR Plan's losses from the Palisades and Eaton wildfires in its consolidated statements of operations for the six months ended June 30, 2025.

*** 

Accounting Standards Codification ("ASC") 944-40-30-2 through 3 and Statement of Statutory Accounting Principles ("SSAP") No. 55 paragraph 15 require salvage and subrogation recoverables to be deducted from the liability for unpaid claims; therefore, loss and loss adjustment expense reserves on the Company's consolidated balance sheets is shown net of estimated salvage and subrogation recoverables, and losses and loss adjustment expenses on its consolidated statements of operations is shown net of salvage and subrogation. The Company applies this accounting method for salvage and subrogation in a consistent manner for both GAAP and statutory reporting purposes.

Six Months
Ended

Three Months
Ended

Second Quarter

6/30/2025

3/31/2025

(Amounts in thousands)

Pro-forma if Company had used $0 of reinsurance limit

Ceded premiums written

$            52,000

$            26,000

$            26,000

Ceded premiums earned

52,000

26,000

26,000

Amount recorded based on 100% of reinsurance limit used

Ceded premiums written (original Limit)

52,000

52,000

—

Reinstatement premiums written

101,000

101,000

—

                 Total ceded premiums written

$          153,000

$          153,000

$                   —

Ceded premiums earned (original limit)

52,000

52,000

—

Reinstatement premiums earned

101,000

50,000

51,000

                 Total ceded premiums earned

$          153,000

$          102,000

$            51,000

Difference in reinsurance premiums between $0 limit used (pro-forma) and full
limit used (recorded)

Ceded premiums written

$          101,000

$          127,000

$           (26,000)

Ceded premiums earned

$          101,000

$            76,000

$            25,000

_________

     Note that ceded premiums written and earned are recorded as reductions to the Company's net premiums written and earned, respectively.

MERCURY GENERAL CORPORATION AND SUBSIDIARIES

SUMMARY OF OPERATING RESULTS

(000's except per-share amounts and ratios)

(unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2025

2024

2025

2024

Revenues:

     Net premiums earned

$      1,366,738

$      1,236,024

$      2,649,808

$      2,402,703

     Net investment income

78,759

68,970

160,238

133,989

     Net realized investment gains

23,480

2,899

46,801

41,090

     Other

8,908

(2,899)

14,916

1,298

          Total revenues

1,477,885

1,304,994

2,871,763

2,579,080

Expenses:

     Losses and loss adjustment expenses

940,037

936,714

2,160,850

1,840,679

     Policy acquisition costs

227,880

203,682

456,601

399,722

     Other operating expenses

96,025

81,702

175,478

158,790

     Interest

7,195

7,799

14,383

15,572

          Total expenses

1,271,137

1,229,897

2,807,312

2,414,763

Income before income taxes

206,748

75,097

64,451

164,317

     Income tax expense

40,276

12,529

6,306

28,287

                    Net income

$         166,472

$           62,568

$           58,145

$         136,030

Basic average shares outstanding

55,389

55,371

55,389

55,371

Diluted average shares outstanding

55,389

55,375

55,389

55,373

Basic Per Share Data

Net income

$               3.01

$               1.13

$               1.05

$               2.46

Net realized investment gains, net of tax

$               0.33

$               0.04

$               0.67

$               0.59

Diluted Per Share Data

Net income

$               3.01

$               1.13

$               1.05

$               2.46

Net realized investment gains, net of tax

$               0.33

$               0.04

$               0.67

$               0.59

Operating Ratios-GAAP Basis

Loss ratio

68.8 %

75.8 %

81.5 %

76.6 %

Expense ratio

23.7 %

23.1 %

23.9 %

23.3 %

Combined ratio

92.5 %

98.9 %

105.4 %

99.9 %

MERCURY GENERAL CORPORATION AND SUBSIDIARIES

CONDENSED BALANCE SHEETS AND OTHER INFORMATION

(000's except per-share amounts and ratios)

June 30, 2025

December 31, 2024

(unaudited)

ASSETS

Investments, at fair value:

     Fixed maturity securities (amortized cost $5,053,927; $4,982,459)

$             4,993,829

$             4,913,378

     Equity securities (cost $611,054; $795,068)

687,652

879,175

     Short-term investments (cost $281,752; $283,792)

281,766

283,817

          Total investments

5,963,247

6,076,370

Cash

1,122,252

720,257

Receivables:

     Premiums

756,554

697,176

          Allowance for credit losses on premiums receivable

(6,300)

(6,400)

                  Premiums receivable, net of allowance for credit losses

750,254

690,776

     Accrued investment income

66,949

67,630

     Other

97,721

62,118

          Total receivables

914,924

820,524

Reinsurance recoverables (net of allowance for credit losses $559; $0)

390,717

28,613

Deferred policy acquisition costs

349,145

335,332

Fixed assets, net

145,681

138,177

Operating lease right-of-use assets

15,602

13,407

Deferred income taxes

53,802

45,854

Goodwill

42,796

42,796

Other intangible assets, net

7,254

7,682

Other assets

77,607

81,620

          Total assets

$             9,083,027

$             8,310,632

LIABILITIES AND SHAREHOLDERS' EQUITY

Loss and loss adjustment expense reserves

$             3,612,160

$             3,152,031

Unearned premiums

2,184,846

2,039,830

Notes payable

574,327

574,128

Accounts payable and accrued expenses

468,310

417,765

Operating lease liabilities

15,845

13,580

Current income taxes

37,946

20,752

Other liabilities

220,096

146,022

Shareholders' equity

1,969,497

1,946,524

          Total liabilities and shareholders' equity

$             9,083,027

$             8,310,632

OTHER INFORMATION

Common stock shares outstanding

55,389

55,389

Book value per share

$                    35.56

$                    35.14

Statutory surplus ^(a)

$2.02 billion

$2.03 billion

Net premiums written to surplus ratio ^(a)

2.74

2.65

Debt to total capital ratio ^(b)

22.6 %

22.8 %

Portfolio duration (including all short-term instruments) ^{(a) (c)}

4.3 years

3.4 years

Policies-in-force (company-wide "PIF") ^(a)

     Personal Auto PIF

1,030

1,019

     Homeowners PIF

859

852

     Commercial Auto PIF

36

39

^(a)     

Unaudited.

^(b)       

Debt to Debt plus Shareholders' Equity (Debt at face value).

^(c)       

Modified duration reflecting anticipated early calls.

SUPPLEMENTAL SCHEDULES

(000's except per-share amounts and ratios)

(unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2025

2024

2025

2024

Reconciliations of Comparable GAAP Measures to Operating Measures^(a)

Net premiums earned

$      1,366,738

$      1,236,024

$   2,649,808

$   2,402,703

Change in net unearned premiums

114,069

119,436

145,380

237,741

Net premiums written

$      1,480,807

$      1,355,460

$   2,795,188

$   2,640,444

Incurred losses and loss adjustment expenses

$         940,037

$         936,714

$   2,160,850

$   1,840,679

Change in net loss and loss adjustment expense reserves

(41,322)

(117,221)

(326,434)

(192,639)

Paid losses and loss adjustment expenses

$         898,715

$         819,493

$   1,834,416

$   1,648,040

Net income

$         166,472

$           62,568

$        58,145

$      136,030

Less: Net realized investment gains

23,480

2,899

46,801

41,090

         Tax on net realized investment gains ^(b)

4,931

609

9,828

8,629

             Net realized investment gains, net of tax

18,549

2,290

36,973

32,461

Operating income

$         147,923

$           60,278

$        21,172

$      103,569

Per diluted share:

Net income

$               3.01

$               1.13

$            1.05

$            2.46

Less: Net realized investment gains, net of tax

0.33

0.04

0.67

0.59

Operating income ^(c)

$               2.67

$               1.09

$            0.38

$            1.87

Combined ratio

105.4 %

99.9 %

Effect of estimated prior periods' loss development

1.8 %

(0.3) %

Combined ratio-accident period basis

107.2 %

99.6 %

^(a) 

See "Information Regarding GAAP and Non-GAAP Measures." 

^(b)       

Based on federal statutory rate of 21%.

^(c)       

Operating income per diluted share for the three months ended June 30, 2025 does not sum due to rounding.