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Mercury General Corporation
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Mercury General Corporation
SEC Form 8-K Press Release — Third Quarter 2025 Results
November 4, 2025
Three Months Ended September 30, 2025
SEC EDGAR (https://www.sec.gov/Archives/edgar/data/0000064996/000119312525264686/d53700dex991.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 Q3 2025.
CONSOLIDATED HIGHLIGHTS
Three Months Ended September 30,
2025 2024 Change $ Change %
Net premiums earned $1,410,400 $1,320,652 $89,748 6.8%
Net premiums written $1,498,861 $1,422,933 $75,928 5.3%
Net realized investment gains, net of tax $66,716 $90,412 ($23,696) (26.2%)
Net income $280,403 $230,856 $49,547 21.5%
Net income per diluted share $5.06 $4.17 $0.89 21.3%
Operating income $213,687 $140,444 $73,243 52.2%
Operating income per diluted share $3.86 $2.54 $1.32 52.0%
Catastrophe losses net of reinsurance $29,000 $39,000 ($10,000) (25.6%)
Combined ratio 87.0% 93.6% — (6.6) pts
Nine Months Ended September 30,
2025 2024 Change $ Change %
Net premiums earned $4,060,208 $3,723,355 $336,853 9.0%
Net income $338,547 $366,886 ($28,339) (7.7%)
Net income per diluted share $6.11 $6.63 ($0.52) (7.8%)
Operating income $234,859 $244,013 ($9,154) (3.8%)
Catastrophe losses net of reinsurance $489,000 $236,000 $253,000 107.2%
Combined ratio 99.0% 97.6% — 1.4 pts
Operating income (loss) is net income (loss) excluding realized investment gains and losses, net of tax.
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.
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 nine months ended September 30, 2025 was reduced by approximately $574 million from subrogation recorded on the Palisades and Eaton wildfires.
The Company experienced favorable development of approximately $27 million on prior accident years' loss and loss adjustment expense reserves for the three months ended September 30, 2025, and favorable development of approximately $74 million for the nine months ended September 30, 2025. 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 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 is primarily due to updated estimates for partial losses.
INVESTMENT RESULTS
Three Months Ended September 30,
2025 2024
Average invested assets at cost $6,135,816 $5,795,086
Net investment income
Before income taxes $83,970 $72,738
After income taxes $70,745 $61,114
Average annual yield on investments
Before income taxes 4.6% 4.6%
After income taxes 4.0% 3.9%
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. Higher net investment income resulted largely from higher average invested assets and cash. Higher nine-month net investment income resulted from higher average yield combined with higher average invested assets and cash, 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 wildfire claims.
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 September 30, 2025:
Gross losses and loss adjustment expenses $2,174,675
Reinsurance recovered and recoverable ($1,293,500)
Net catastrophe losses and LAE on Eaton and Palisades fires before FAIR Plan $306,763
Company's share of FAIR Plan losses and LAE $99,216
Recoupable portion of FAIR Plan losses and LAE ($25,000)
Net FAIR Plan losses and LAE $74,216
Net losses and LAE on Eaton and Palisades fires $380,979
The Company is actively pursuing subrogation against Southern California Edison 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. SCE has not admitted that its equipment caused the Eaton fire, but significant evidence indicates that SCE's equipment was the cause. 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.
In June 2025, the Company sold its subrogation rights on the Palisades fire to a third party for approximately $48 million, with $27 million received as of September 30, 2025.
As of September 30, 2025, the Company has paid out approximately $1,404 million for losses and loss adjustment expenses related to the Palisades and Eaton wildfires. The Company has received 100% of the reinsurance recoverable amounts billed to its reinsurers through September 30, 2025.
SUMMARY OF OPERATING RESULTS
Net premiums earned $1,410,400
Net investment income $83,970
Net realized investment gains $84,451
Other $6,105
Total revenues $1,584,926
Losses and loss adjustment expenses $882,745
Policy acquisition costs $236,164
Other operating expenses $108,518
Interest $7,181
Total expenses $1,234,608
Income before income taxes $350,318
Income tax expense $69,915
Net income $280,403
Diluted average shares outstanding 55,389
Loss ratio 62.6%
Expense ratio 24.4%
Combined ratio 87.0%
CONDENSED BALANCE SHEET (as of September 30, 2025)
Total investments $6,373,605
Cash $1,252,575
Total receivables $901,059
Total assets $9,372,742
Loss and LAE reserves $3,595,972
Unearned premiums $2,273,531
Shareholders' equity $2,232,314
Book value per share $40.30
Statutory surplus $2.24 billion
Net premiums written to surplus ratio 2.51
Debt to total capital ratio 20.5%
Portfolio duration 3.9 years
Personal Auto PIF 1,035
Homeowners PIF 868
Commercial Auto PIF 35