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Mercury General Corporation
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Mercury General Corporation
SEC Form 8-K Press Release — Second Quarter 2025 Results
July 29, 2025
Three Months Ended June 30, 2025
SEC EDGAR (https://www.sec.gov/Archives/edgar/data/0000064996/000119312525167999/d949213dex991.htm)
Mercury General holds quarterly earnings conference calls, but FMP does not carry transcripts for MCY from mid-2020 through late 2024. This press release is the best available public record for Q2 2025.
CONSOLIDATED HIGHLIGHTS
Three Months Ended June 30,
2025 2024 Change $ Change %
Net premiums earned $1,366,738 $1,236,024 $130,714 10.6%
Net premiums written $1,480,807 $1,355,460 $125,347 9.2%
Net realized investment gains, net of tax $18,549 $2,290 $16,259 710.0%
Net income $166,472 $62,568 $103,904 166.1%
Net income per diluted share $3.01 $1.13 $1.88 166.4%
Operating income $147,923 $60,278 $87,645 145.4%
Operating income per diluted share $2.67 $1.09 $1.58 145.0%
Catastrophe losses net of reinsurance $13,000 $125,000 ($112,000) (89.6%)
Combined ratio 92.5% 98.9% — (6.4) pts
Six Months Ended June 30,
2025 2024 Change $ Change %
Net premiums earned $2,649,808 $2,402,703 $247,105 10.3%
Net income (loss) $58,145 $136,030 ($77,885) (57.3%)
Net income (loss) per diluted share $1.05 $2.46 ($1.41) (57.3%)
Operating income $21,172 $103,569 ($82,397) (79.6%)
Catastrophe losses net of reinsurance $460,000 $197,000 $263,000 133.5%
Combined ratio 105.4% 99.9% — 5.5 pts
Operating income (loss) is net income (loss) excluding realized investment gains and losses, net of tax.
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.
The majority of 2025 catastrophe losses resulted from the Palisades and Eaton wildfires in California and severe storms in Texas and Oklahoma. 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.
The Company experienced unfavorable development of approximately $4 million on prior accident years' loss and loss adjustment expense reserves for the three months ended June 30, 2025, and favorable development of approximately $47 million for the six months ended June 30, 2025. 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.
INVESTMENT RESULTS
Three Months Ended June 30,
2025 2024
Average invested assets at cost $5,703,599 $5,536,170
Net investment income
Before income taxes $78,759 $68,970
After income taxes $66,021 $57,966
Average annual yield on investments
Before income taxes 4.7% 4.5%
After income taxes 3.9% 3.8%
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. Higher net investment income resulted largely from higher average yield combined with higher average invested assets and cash. The higher yield was 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.
The Board of Directors declared a quarterly dividend of $0.3175 per share.
UPDATED INFORMATION REGARDING THE PALISADES AND EATON WILDFIRES
Components of net losses from the Palisades and Eaton wildfires as of June 30, 2025:
Gross losses and loss adjustment expenses $2,153,000
Reinsurance recovered and recoverable ($1,293,500)
Net catastrophe losses and LAE on Eaton and Palisades fires before FAIR Plan $285,000
Company's share of FAIR Plan losses and LAE $99,000
Recoupable portion of FAIR Plan losses and LAE ($25,000)
Net FAIR Plan losses and LAE $74,000
Net losses and LAE on Eaton and Palisades fires $359,000
The Company is actively pursuing subrogation against Southern California Edison 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. 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. SCE has disclosed that it is probable that SCE will incur material losses from the Eaton fire.
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. The recovery amount from the guaranteed percentage of losses is approximately $47 million, with $27 million received as of June 30, 2025.
As of June 30, 2025, the Company has paid out approximately $1,320 million for losses and loss adjustment expenses related to the Palisades and Eaton wildfires. Through June 30, 2025, the Company has billed reinsurers $933 million for the losses and LAE paid and 100% of that amount has been collected.
SUMMARY OF OPERATING RESULTS
Net premiums earned $1,366,738
Net investment income $78,759
Net realized investment gains $23,480
Other $8,908
Total revenues $1,477,885
Losses and loss adjustment expenses $940,037
Policy acquisition costs $227,880
Other operating expenses $96,025
Interest $7,195
Total expenses $1,271,137
Income before income taxes $206,748
Income tax expense $40,276
Net income $166,472
Diluted average shares outstanding 55,389
Loss ratio 68.8%
Expense ratio 23.7%
Combined ratio 92.5%
CONDENSED BALANCE SHEET (as of June 30, 2025)
Total investments $5,963,247
Cash $1,122,252
Total receivables $914,924
Total assets $9,083,027
Loss and LAE reserves $3,612,160
Unearned premiums $2,184,846
Shareholders' equity $1,969,497
Book value per share $35.56
Statutory surplus $2.02 billion
Net premiums written to surplus ratio 2.74
Debt to total capital ratio 22.6%
Portfolio duration 4.3 years
Personal Auto PIF 1,030
Homeowners PIF 859
Commercial Auto PIF 36