Mercury General Corporation Announces Third Quarter Results and Declares Quarterly Dividend

Consolidated Highlights

Three Months Ended

September 30,

Change

Nine Months Ended

September 30,

Change

2025

2024

$

%

2025

2024

$

%

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

Net premiums earned ⁽²⁾

$  1,410,400

$  1,320,652

$     89,748

6.8

$  4,060,208

$  3,723,355

$   336,853

9.0

Net premiums written ^{(1) (2)} 

$  1,498,861

$  1,422,933

$     75,928

5.3

$  4,294,048

$  4,063,377

$   230,671

5.7

Net realized investment gains, net of tax ⁽³⁾

$      66,716

$      90,412

$   (23,696)

(26.2)

$    103,688

$    122,873

$   (19,185)

(15.6)

Net income

$     280,403

$    230,856

$     49,547

21.5

$    338,547

$    366,886

$   (28,339)

(7.7)

Net income per diluted share

$          5.06

$         4.17

$        0.89

21.3

$         6.11

$         6.63

$       (0.52)

(7.8)

Operating income ⁽¹⁾

$     213,687

$    140,444

$     73,243

52.2

$    234,859

$    244,013

$     (9,154)

(3.8)

Operating income per diluted share ⁽¹⁾

$          3.86

$         2.54

$        1.32

52.0

$         4.24

$         4.41

$       (0.17)

(3.9)

Catastrophe losses net of reinsurance ⁽⁴⁾

$      29,000

$      39,000

$   (10,000)

(25.6)

$    489,000

$    236,000

$   253,000

107.2

Combined ratio ⁽⁵⁾

87.0 %

93.6 %

—

(6.6) pts

99.0 %

97.6 %

—

1.4 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⁾

Both net premiums earned and net premiums written for the nine months ended September 30, 2025 include $101 million of increased ceded premiums due to the reinstatement premiums paid and recorded in the first half 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.   

⁽³⁾

Net realized investment gains before tax was $84 million and $114 million for the three months ended September 30, 2025 and 2024, respectively, and $131 million and $156 million for the nine months ended September 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, winter storms and rainstorms in California, and the impact of Hurricane Helene in Florida and Georgia. Catastrophe losses net of reinsurance for the nine months ended September 30, 2025 was reduced by approximately $574 million from subrogation recorded on the Palisades and Eaton wildfires. 

⁽⁵⁾

The Company experienced favorable development of approximately $27 million and unfavorable development of approximately $8 million on prior accident years' loss and loss adjustment expense reserves for the three months ended September 30, 2025 and 2024, respectively, and favorable development of approximately $74 million and unfavorable development of approximately $16 million on prior accident years' loss and loss adjustment expense reserves for the nine months ended September 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 automobile and homeowners lines of insurance business, including favorable development on the 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 and homeowners lines of insurance business.

Investment Results

Three Months Ended September 30,

Nine Months Ended September 30,

2025

2024

2025

2024

(000's except average annual yield)

Average invested assets at cost ⁽¹⁾

$      6,135,816

$      5,795,086

$      5,840,849

$    5,571,831

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

     Before income taxes

$           83,970

$           72,738

$         244,208

$       206,726

     After income taxes

$           70,745

$           61,114

$         204,616

$       173,928

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

     Before income taxes

4.6 %

4.6 %

4.7 %

4.5 %

     After income taxes

4.0 %

3.9 %

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 $12.9 million and $6.8 million ($10.2 million and $5.3 million after tax) for the three months ended September 30, 2025 and 2024, respectively, and approximately $38.4 million and $18.6 million ($30.4 million and $14.7 million after tax) for the nine months ended September 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 months ended September 30, 2025 compared to the corresponding period in 2024 resulted largely from higher average invested assets and cash. Higher net investment income before and after income taxes for the nine months ended September 30, 2025 compared to the corresponding period 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 nine months ended September 30, 2025 increased compared to the corresponding period 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.

For the Nine

Months Ended

September 30, 2025

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

$            2,174,675

$       2,153,000

$       2,149,000

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

(526,654)

(528,000)

(525,000)

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

(47,758)

(46,500)

—

Reinsurance recovered and recoverable ⁽³⁾

(1,293,500)

(1,293,500)

(1,293,500)

Net catastrophe losses and loss adjustment expenses on Eaton and Palisades

fires before FAIR Plan

$               306,763

$          285,000

$          330,500

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

$                 99,216

$            99,000

$          108,500

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

(25,000)

(25,000)

(25,000)

Net FAIR Plan losses and loss adjustment expenses

$                 74,216

$            74,000

$            83,500

Net losses and loss adjustment expenses on Eaton and Palisades fires ⁽⁶⁾

$               380,979

$          359,000

$          414,000

⁽¹⁾

The Company is actively pursuing subrogation against Southern California Edison ("SCE") on the Eaton fire. The Company recorded approximately $527 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 September 30, 2025, and thereby reduced losses and loss adjustment expenses by the same amount in its consolidated statements of operations for the nine months ended September 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 and entered into a negotiated agreement without litigation with one insurance company to pay 52% of the losses incurred. For utility caused California wildfires occurring since 2017 through 2024 where SCE and other utility companies settled the subrogation claims without admitting fault, such companies 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 as well as management's estimates and assumptions derived from industry experience, including recent market interest in the acquisition of the Company's subrogation rights on the Eaton fire, the Company believes $527 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 $48 million, with $27 million received as of September 30, 2025. The remaining balance of approximately $21 million at September 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 $48 million as an offset against losses and loss adjustment expenses in its consolidated statements of operations for the nine months ended September 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 nine months ended September 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 received approval from 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 approximately $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 nine months ended September 30, 2025.

⁽⁶⁾

The Company recorded a net loss of approximately $22 million in its consolidated statements of operations for the three months ended September 30, 2025 due to an increase in estimated net losses and loss adjustment expenses on the Palisades and Eaton wildfires. The increase in estimated net losses and loss adjustment expenses is primarily due to updated estimates for partial losses.

***

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.

MERCURY GENERAL CORPORATION AND SUBSIDIARIES

SUMMARY OF OPERATING RESULTS

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

(unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2025

2024

2025

2024

Revenues:

     Net premiums earned

$      1,410,400

$      1,320,652

$      4,060,208

$      3,723,355

     Net investment income

83,970

72,738

244,208

206,726

     Net realized investment gains

84,451

114,446

131,251

155,536

     Other

6,105

22,538

21,022

23,837

          Total revenues

1,584,926

1,530,374

4,456,689

4,109,454

Expenses:

     Losses and loss adjustment expenses

882,745

918,439

3,043,596

2,759,117

     Policy acquisition costs

236,164

230,293

692,765

630,016

     Other operating expenses

108,518

86,861

283,996

245,651

     Interest

7,181

7,717

21,562

23,288

          Total expenses

1,234,608

1,243,310

4,041,919

3,658,072

Income before income taxes

350,318

287,064

414,770

451,382

     Income tax expense

69,915

56,208

76,223

84,496

                    Net income

$         280,403

$         230,856

$         338,547

$         366,886

Basic average shares outstanding

55,389

55,371

55,389

55,371

Diluted average shares outstanding

55,389

55,376

55,389

55,374

Basic Per Share Data

Net income

$               5.06

$               4.17

$               6.11

$               6.63

Net realized investment gains, net of tax

$               1.20

$               1.63

$               1.87

$               2.22

Diluted Per Share Data

Net income

$               5.06

$               4.17

$               6.11

$               6.63

Net realized investment gains, net of tax

$               1.20

$               1.63

$               1.87

$               2.22

Operating Ratios-GAAP Basis

Loss ratio

62.6 %

69.5 %

75.0 %

74.1 %

Expense ratio

24.4 %

24.0 %

24.1 %

23.5 %

Combined ratio ^(a)

87.0 %

93.6 %

99.0 %

97.6 %

(a)

Combined ratios for the three months ended September 30, 2024 and nine months ended September 30, 2025 do not sum due to rounding.

MERCURY GENERAL CORPORATION AND SUBSIDIARIES

CONDENSED BALANCE SHEETS AND OTHER INFORMATION

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

September 30, 2025

December 31, 2024

(unaudited)

ASSETS

Investments, at fair value:

     Fixed maturity securities (amortized cost $5,175,844; $4,982,459)

$             5,154,481

$             4,913,378

     Equity securities (cost $643,014; $795,068)

746,227

879,175

     Short-term investments (cost $472,878; $283,792)

472,897

283,817

          Total investments

6,373,605

6,076,370

Cash

1,252,575

720,257

Receivables:

     Premiums

778,611

697,176

          Allowance for credit losses on premiums receivable

(6,400)

(6,400)

                  Premiums receivable, net of allowance for credit losses

772,211

690,776

     Accrued investment income

69,107

67,630

     Other

59,741

62,118

          Total receivables

901,059

820,524

Reinsurance recoverables (net of allowance for credit losses $266; $0)

175,768

28,613

Deferred policy acquisition costs

362,886

335,332

Fixed assets, net

146,797

138,177

Operating lease right-of-use assets

13,483

13,407

Deferred income taxes

27,852

45,854

Goodwill

42,796

42,796

Other intangible assets, net

7,040

7,682

Other assets

68,881

81,620

          Total assets

$             9,372,742

$             8,310,632

LIABILITIES AND SHAREHOLDERS' EQUITY

Loss and loss adjustment expense reserves

$             3,595,972

$             3,152,031

Unearned premiums

2,273,531

2,039,830

Notes payable

574,427

574,128

Accounts payable and accrued expenses

422,351

417,765

Operating lease liabilities

13,712

13,580

Current income taxes

81,845

20,752

Other liabilities

178,590

146,022

Shareholders' equity

2,232,314

1,946,524

          Total liabilities and shareholders' equity

$             9,372,742

$             8,310,632

OTHER INFORMATION

Common stock shares outstanding

55,389

55,389

Book value per share

$                    40.30

$                    35.14

Statutory surplus ^(a)

$2.24 billion

$2.03 billion

Net premiums written to surplus ratio ^(a)

2.51

2.65

Debt to total capital ratio ^(b)

20.5 %

22.8 %

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

3.9 years

3.4 years

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

     Personal Auto PIF

1,035

1,019

     Homeowners PIF

868

852

     Commercial Auto PIF

35

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 September 30,

Nine Months Ended September 30,

2025

2024

2025

2024

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

Net premiums earned

$       1,410,400

$       1,320,652

$    4,060,208

$    3,723,355

Change in net unearned premiums

88,461

102,281

233,840

340,022

Net premiums written

$       1,498,861

$       1,422,933

$    4,294,048

$    4,063,377

Incurred losses and loss adjustment expenses

$          882,745

$          918,439

$    3,043,596

$    2,759,117

Change in net loss and loss adjustment expense reserves

(57,401)

(97,365)

(383,836)

(290,003)

Paid losses and loss adjustment expenses

$          825,344

$          821,074

$    2,659,760

$    2,469,114

Net income

$          280,403

$          230,856

$       338,547

$       366,886

Less: Net realized investment gains

84,451

114,446

131,251

155,536

         Tax on net realized investment gains ^(b)

17,735

24,034

27,563

32,663

             Net realized investment gains, net of tax

66,716

90,412

103,688

122,873

Operating income

$          213,687

$          140,444

$       234,859

$       244,013

Per diluted share:

Net income

$                5.06

$                4.17

$             6.11

$             6.63

Less: Net realized investment gains, net of tax

1.20

1.63

1.87

2.22

Operating income

$                3.86

$                2.54

$             4.24

$             4.41

Combined ratio

99.0 %

97.6 %

Effect of estimated prior periods' loss development

1.8 %

(0.4) %

Combined ratio-accident period basis

100.8 %

97.2 %

(a)

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

(b)

Based on federal statutory rate of 21%.