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

2024

2023

$

%

2024

2023

$

%

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

Net premiums earned 

$  1,320,652

$  1,090,311

$  230,341

21.1

$  3,723,355

$  3,129,483

$  593,872

19.0

Net premiums written ⁽¹⁾ 

$  1,422,933

$  1,206,503

$  216,430

17.9

$  4,063,377

$  3,332,049

$  731,328

21.9

Net realized investment gains (losses), net of tax ⁽²⁾

$    90,412

$   (71,101)

$  161,513

NM

$  122,873

$   (48,010)

$  170,883

NM

Net income (loss) ⁽³⁾

$  230,856

$    (8,227)

$  239,083

NM

$  366,886

$   (95,058)

$  461,944

NM

Net income (loss) per diluted share ⁽³⁾

$       4.17

$      (0.15)

$       4.32

NM

$       6.63

$      (1.72)

$       8.35

NM

Operating income (loss) ^{(1) (3)}

$  140,444

$    62,874

$    77,570

123.4

$  244,013

$   (47,048)

$  291,061

NM

Operating income (loss) per diluted share ^{(1) (3)}

$       2.54

$       1.14

$       1.40

122.8

$       4.41

$      (0.85)

$       5.26

NM

Catastrophe losses net of reinsurance ⁽⁴⁾

$    39,000

$    33,000

$     6,000

18.2

$  236,000

$  223,000

$    13,000

5.8

Combined ratio ⁽⁵⁾

93.6 %

98.6 %

—

      (5.0)   pts

97.6 %

107.9 %

—

        (10.3)        pts

NM = Not Meaningful

⁽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 realized investment gains (losses) before tax were $114 million and $(90) million for the three months ended September 30, 2024 and 2023, respectively, and $156 million and $(61) million for the nine months ended September 30, 2024 and 2023, 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.

⁽³⁾       

Included in net income and operating income are approximately $20 million and $14 million ($16 million and $11 million, net of tax) of net realized gains from the sales and held-for-sale classifications of office buildings for the three and nine months ended September 30, 2024, respectively, and approximately $6 million ($5 million, net of tax) of net realized gains from the sales of office buildings for the nine months ended September 30, 2023. These before-tax net realized gains are included in other revenues in the Company's "Summary of Operating Results" on page 4.

⁽⁴⁾         

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. The majority of 2023 catastrophe losses resulted from winter storms and rainstorms in California, Texas and Oklahoma, and the impact of Hurricane Hilary in California. The Company experienced unfavorable development of approximately $7 million and favorable development of approximately $4 million on prior years' catastrophe losses for the nine months ended September 30, 2024 and 2023, respectively.  

⁽⁵⁾       

The Company experienced unfavorable development of approximately $8 million and favorable development of approximately $12 million on prior accident years' loss and loss adjustment expense reserves for the three months ended September 30, 2024 and 2023, respectively, and unfavorable development of approximately $16 million and favorable development of approximately $32 million on prior accident years' loss and loss adjustment expense reserves for the nine months ended September 30, 2024 and 2023, respectively. 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. The year-to-date favorable development in 2023 was primarily attributable to lower than estimated losses and loss adjustment expenses in the private passenger automobile and homeowners lines of insurance business, partially offset by unfavorable development in the commercial property line of insurance business.

Investment Results

Three Months Ended September 30,

Nine Months Ended September 30,

2024

2023

2024

2023

(000's except average annual yield)

Average invested assets at cost ⁽¹⁾

$      5,795,086

$      5,106,049

$      5,571,831

$      5,060,778

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

     Before income taxes

$           72,738

$           60,965

$         206,726

$         171,287

     After income taxes

$           61,114

$           51,958

$         173,928

$         146,571

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

     Before income taxes

4.6 %

4.4 %

4.5 %

4.3 %

     After income taxes

3.9 %

3.8 %

3.8 %

3.7 %

(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 $6.8 million and $5.1 million ($5.3 million and $4.0 million after tax) for the three months ended September 30, 2024 and 2023, respectively, and approximately $18.6 million and $9.6 million ($14.7 million and $7.6 million after tax) for the nine months ended September 30, 2024 and 2023, 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 nine months ended September 30, 2024 compared to the corresponding periods in 2023 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 nine months ended September 30, 2024 increased compared to the corresponding periods in 2023, primarily due to the maturity and replacement of lower yielding investments purchased when market interest rates were lower with higher yielding investments.

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,

2024

2023

2024

2023

Revenues:

     Net premiums earned

$      1,320,652

$      1,090,311

$      3,723,355

$      3,129,483

     Net investment income

72,738

60,965

206,726

171,287

     Net realized investment gains (losses)

114,446

(90,001)

155,536

(60,772)

     Other

22,538

3,917

23,837

15,000

          Total revenues

1,530,374

1,065,192

4,109,454

3,254,998

Expenses:

     Losses and loss adjustment expenses

918,439

823,742

2,759,117

2,651,081

     Policy acquisition costs

230,293

181,569

630,016

518,813

     Other operating expenses

86,861

69,192

245,651

207,223

     Interest

7,717

5,918

23,288

16,398

          Total expenses

1,243,310

1,080,421

3,658,072

3,393,515

Income (loss) before income taxes

287,064

(15,229)

451,382

(138,517)

     Income tax expense (benefit)

56,208

(7,002)

84,496

(43,459)

                    Net income (loss)

$         230,856

$           (8,227)

$         366,886

$         (95,058)

Basic average shares outstanding

55,371

55,371

55,371

55,371

Diluted average shares outstanding

55,376

55,371

55,374

55,371

Basic Per Share Data

Net income (loss)

$               4.17

$             (0.15)

$               6.63

$             (1.72)

Net realized investment gains (losses), net of tax

$               1.63

$             (1.28)

$               2.22

$             (0.87)

Diluted Per Share Data

Net income (loss)

$               4.17

$             (0.15)

$               6.63

$             (1.72)

Net realized investment gains (losses), net of tax

$               1.63

$             (1.28)

$               2.22

$             (0.87)

Operating Ratios-GAAP Basis

Loss ratio

69.5 %

75.6 %

74.1 %

84.7 %

Expense ratio

24.0 %

23.0 %

23.5 %

23.2 %

Combined ratio ^(a)

93.6 %

98.6 %

97.6 %

107.9 %

(a)   

Combined ratio for the three months ended September 30, 2024 does 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, 2024

December 31, 2023

(unaudited)

ASSETS

Investments, at fair value:

     Fixed maturity securities (amortized cost $4,882,324; $4,394,983)

$             4,858,840

$             4,319,336

     Equity securities (cost $755,443; $654,939)

870,837

730,693

     Short-term investments (cost $289,616; $179,375)

288,704

178,491

          Total investments

6,018,381

5,228,520

Cash

616,275

550,903

Receivables:

     Premiums

731,379

607,025

          Allowance for credit losses on premiums receivable

(6,100)

(5,300)

                  Premiums receivable, net of allowance for credit losses

725,279

601,725

     Accrued investment income

65,118

59,128

     Other

57,862

25,603

          Total receivables

848,259

686,456

Reinsurance recoverables (net of allowance for credit losses $4; $12)

28,019

31,947

Deferred policy acquisition costs

341,406

293,844

Fixed assets, net

135,919

151,183

Operating lease right-of-use assets

13,947

14,406

Current income taxes

—

4,081

Deferred income taxes

20,905

33,013

Goodwill

42,796

42,796

Other intangible assets, net

7,906

8,333

Other assets

79,135

57,915

          Total assets

$             8,152,948

$             7,103,397

LIABILITIES AND SHAREHOLDERS' EQUITY

Loss and loss adjustment expense reserves

$             3,073,690

$             2,785,702

Unearned premiums

2,076,910

1,735,660

Notes payable

574,028

573,729

Accounts payable and accrued expenses

231,519

175,219

Operating lease liabilities

14,055

14,231

Current income taxes

24,394

—

Other liabilities

296,062

270,711

Shareholders' equity

1,862,290

1,548,145

          Total liabilities and shareholders' equity

$             8,152,948

$             7,103,397

OTHER INFORMATION

Common stock shares outstanding

55,371

55,371

Book value per share

$                    33.63

$                    27.96

Statutory surplus ^(a)

$1.88 billion

$1.67 billion

Net premiums written to surplus ratio ^(a)

2.76

2.68

Debt to total capital ratio ^(b)

23.6 %

27.1 %

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

3.0 years

3.0 years

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

     Personal Auto PIF

1,016

1,032

     Homeowners PIF

829

760

     Commercial Auto PIF

40

42

(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,

2024

2023

2024

2023

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

Net premiums earned

$       1,320,652

$       1,090,311

$    3,723,355

$    3,129,483

Change in net unearned premiums

102,281

116,192

340,022

202,566

Net premiums written

$       1,422,933

$       1,206,503

$    4,063,377

$    3,332,049

Incurred losses and loss adjustment expenses

$          918,439

$          823,742

$    2,759,117

$    2,651,081

Change in net loss and loss adjustment expense reserves

(97,365)

(4,865)

(290,003)

(137,618)

Paid losses and loss adjustment expenses

$          821,074

$          818,877

$    2,469,114

$    2,513,463

Net income (loss)

$          230,856

$            (8,227)

$       366,886

$       (95,058)

Less: Net realized investment gains (losses)

114,446

(90,001)

155,536

(60,772)

         Tax on net realized investment gains (losses)^(b)

24,034

(18,900)

32,663

(12,762)

             Net realized investment gains (losses), net of tax

90,412

(71,101)

122,873

(48,010)

Operating income (loss)

$          140,444

$            62,874

$       244,013

$       (47,048)

Per diluted share:

Net income (loss)

$                4.17

$              (0.15)

$             6.63

$           (1.72)

Less: Net realized investment gains (losses), net of tax

1.63

(1.28)

2.22

(0.87)

Operating income (loss)^(c)

$                2.54

$                1.14

$             4.41

$           (0.85)

Combined ratio

97.6 %

107.9 %

Effect of estimated prior periods' loss development

(0.4) %

1.0 %

Combined ratio-accident period basis

97.2 %

108.9 %

(a)

See "Information Regarding GAAP and Non-GAAP Measures" on page 7. 

(b)   

Based on federal statutory rate of 21%.

(c)   

Operating Income per Diluted Share for the Three Months Ended September 30, 2023 Does Not Sum Due to Rounding.