Mercury General Corporation Announces Second Quarter Results and Declares Quarterly Dividend
LOS ANGELES, July 29, 2025 /PRNewswire/ -- Mercury General Corporation (NYSE: MCY) reported today for the second quarter of 2025:
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.
The Board of Directors declared a quarterly dividend of $0.3175 per share. The dividend will be paid on September 25, 2025 to shareholders of record on September 11, 2025.
Updated Information Regarding the Palisades and Eaton Wildfires
In January 2025, extreme wind-driven wildfires caused widespread damage across parts of Southern California, primarily in the communities of Pacific Palisades and Altadena. The two largest of these Southern California wildfires are known as the Palisades and Eaton wildfires. The Company recorded net catastrophe losses and loss adjustment expenses ("LAE") before taxes from the Palisades and Eaton wildfires of approximately $359 million in its consolidated statements of operations for the six months ended June 30, 2025. The following table presents the components of net losses from the Palisades and Eaton wildfires as of June 30, 2025 and March 31, 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
$ 2,153,000
$ 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
