Mercury General Corporation Announces First Quarter Results and Declares Quarterly Dividend

Consolidated Highlights

Change

2026

2025

$

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

Net premiums earned ⁽²⁾

$   1,452,413

$   1,283,069

$   169,344

13.2

Net premiums written ^{(1) (2)} 

$   1,550,118

$   1,314,380

$   235,738

17.9

Direct premiums written ⁽¹⁾

$   1,572,741

$   1,445,443

$   127,298

8.8

Net realized investment (losses) gains, net of tax ⁽³⁾

$         (3,589)

$        18,424

$    (22,013)

(119.5)

Net income (loss)

$      190,421

$     (108,327)

$   298,748

NM

Net income (loss) per diluted share

$            3.44

$           (1.96)

$           5.4

NM

Operating income (loss) ⁽¹⁾

$      194,010

$     (126,751)

$   320,761

NM

Operating income (loss) per diluted share ⁽¹⁾

$            3.50

$           (2.29)

$         5.79

NM

Catastrophe losses net of reinsurance ⁽⁴⁾

$        93,000

$      447,000

$  (354,000)

(79.2)

Combined ratio ⁽⁵⁾

89.3 %

119.2 %

—

(29.9) 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  premiums earned and net premiums written for the three months ended March 31, 2025 include $76 million and $127 million, respectively, of increased ceded reinsurance premiums due to the Company's reinsurance treaty being fully used up and from the reinstatement of the Company's catastrophe reinsurance benefits following the Palisades and Eaton wildfires in January 2025.     

⁽³⁾

Net realized investment (losses) gains before tax was $(5) million and $23 million for the three months ended March 31, 2026 and 2025, 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 under GAAP.

⁽⁴⁾

The majority of 2026 catastrophe losses resulted from adverse reserve development on the Palisades and Eaton wildfires, and storms in California, Texas and Oklahoma. The majority of 2025 catastrophe losses resulted from the Palisades and Eaton wildfires. 

⁽⁵⁾

The Company experienced favorable development of approximately $9 million and $51 million on prior accident years' loss and loss adjustment expense reserves for the three months ended March 31, 2026 and 2025, respectively. The favorable development for the first quarter of 2026 was primarily attributable to lower than estimated losses in the automobile line of insurance business, partially offset by adverse development on the homeowners line of insurance business, including adverse development on the prior years' catastrophe losses. The favorable development for the first quarter of 2025 was primarily attributable to lower than estimated losses in the 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 March 31,

2026

2025

(000's except average annual yield)

Average invested assets at cost ⁽¹⁾

$    6,643,376

$    5,594,499

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

     Before income taxes

$         85,636

$         81,479

     After income taxes

$         72,859

$         67,850

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

     Before income taxes

4.5 %

4.9 %

     After income taxes

3.9 %

4.1 %

(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 $11.2 million and $13.1 million ($8.9 million and $10.3 million after tax) for the three months ended March 31, 2026 and 2025, 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 March 31, 2026 compared to the corresponding period in 2025 resulted largely from higher average invested assets. Average annual yield on investments before income taxes for the three months ended March 31, 2026 decreased from the corresponding period in 2025, primarily due to an increase in tax-exempt investments with lower pre-tax yields, combined with lower yields on floating rate investments resulting from lower short-term market interest rates. Average annual yield on investments after income taxes for the three months ended March 31, 2026 decreased from the corresponding period in 2025, primarily due to lower yields on floating rate investments resulting from lower short-term market interest rates.

MERCURY GENERAL CORPORATION AND SUBSIDIARIES

SUMMARY OF OPERATING RESULTS

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

(unaudited)

Three Months Ended March 31,

2026

2025

Revenues:

     Net premiums earned

$         1,452,413

$         1,283,069

     Net investment income

85,636

81,479

     Net realized investment (losses) gains

(4,543)

23,321

     Other

6,303

6,010

          Total revenues

1,539,809

1,393,879

Expenses:

     Losses and loss adjustment expenses

932,950

1,220,813

     Policy acquisition costs

240,502

228,720

     Other operating expenses

123,887

79,453

     Interest

6,817

7,189

          Total expenses

1,304,156

1,536,175

Income (loss) before income taxes

235,653

(142,296)

     Income tax expense (benefit)

45,232

(33,969)

                    Net income (loss)

$            190,421

$          (108,327)

Basic average shares outstanding

55,389

55,389

Diluted average shares outstanding

55,389

55,389

Basic Per Share Data

Net income (loss)

$                  3.44

$                 (1.96)

Net realized investment (losses) gains, net of tax     

$                 (0.06)

$                  0.33

Diluted Per Share Data

Net income (loss)

$                  3.44

$                 (1.96)

Net realized investment (losses) gains, net of tax

$                 (0.06)

$                  0.33

Operating Ratios-GAAP Basis

Loss ratio

64.2 %

95.1 %

Expense ratio

25.1 %

24.0 %

Combined ratio ^(a)

89.3 %

119.2 %

(a)

Combined ratio for the three months ended March 31, 2025 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)

March 31, 2026

December 31, 2025

(unaudited)

ASSETS

Investments, at fair value:

     Fixed maturity securities (amortized cost $5,534,785; $5,449,726)

$         5,499,834

$         5,430,251

     Equity securities (cost $801,687; $728,460)

883,623

812,787

     Short-term investments (cost $441,810; $336,978)

441,841

336,992

          Total investments

6,825,298

6,580,030

Cash

1,350,883

1,315,574

Receivables:

     Premiums

825,000

751,554

          Allowance for credit losses on premiums receivable

(6,100)

(6,000)

                  Premiums receivable, net of allowance for credit losses

818,900

745,554

     Accrued investment income

73,380

73,004

     Other

86,557

86,508

          Total receivables

978,837

905,066

Reinsurance recoverables (net of allowance for credit losses $2; $39)   

47,771

109,672

Deferred policy acquisition costs

366,573

359,724

Fixed assets, net

150,854

146,880

Operating lease right-of-use assets

12,153

12,125

Deferred income taxes

31,821

30,637

Goodwill

42,796

42,796

Other intangible assets, net

6,613

6,827

Other assets

59,266

51,338

          Total assets

$         9,872,865

$         9,560,669

LIABILITIES AND SHAREHOLDERS' EQUITY

Loss and loss adjustment expense reserves

$         3,646,201

$         3,633,338

Unearned premiums

2,353,558

2,255,935

Notes payable

574,626

574,527

Accounts payable and accrued expenses

394,423

448,703

Operating lease liabilities

12,652

12,328

Current income taxes

77,180

30,770

Other liabilities

224,115

187,793

Shareholders' equity

2,590,110

2,417,275

          Total liabilities and shareholders' equity

$         9,872,865

$         9,560,669

OTHER INFORMATION

Common stock shares outstanding

55,389

55,389

Book value per share

$                46.76

$                43.64

Statutory surplus ^(a)

$2.58 billion

$2.39 billion

Net premiums written to surplus ratio ^(a)

2.31

2.39

Debt to total capital ratio ^(b)

18.2 %

19.2 %

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

4.4 years

4.4 years

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

     Personal Auto PIF

1,057

1,044

     Homeowners PIF

906

883

     Commercial Auto PIF

34

34

     All Other PIF ^(d)

311

304

          Total PIF

2,308

2,265

(a)

Unaudited.

(b)

Debt to Debt plus Shareholders' Equity (Debt at face value).

(c)

Modified duration reflecting anticipated early calls.

(d)

All Other PIF represents the combined PIF of all the other smaller lines of insurance business, which in aggregate accounted for only 6.1% of the total company-wide direct premiums written for the three months ended March 31, 2026.

SUPPLEMENTAL SCHEDULES

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

(unaudited)

Three Months Ended March 31,

2026

2025

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

Net premiums earned

$         1,452,413

$         1,283,069

Change in net unearned premiums

97,705

31,311

Net premiums written

$         1,550,118

$         1,314,380

Assumed premiums written

$             (39,965)

$             (25,733)

Ceded premiums written

$              62,588

$            156,796

Direct premiums written

$         1,572,741

$         1,445,443

Incurred losses and loss adjustment expenses

$            932,950

$         1,220,813

Change in net loss and loss adjustment expense reserves

(13,422)

(285,112)

Paid losses and loss adjustment expenses

$            919,528

$            935,701

Net income (loss)

$            190,421

$           (108,327)

Less: Net realized investment (losses) gains

(4,543)

23,321

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

(954)

4,897

             Net realized investment (losses) gains, net of tax

18,424

Operating income (loss)

$            194,010

$           (126,751)

Per diluted share:

Net income (loss)

$                  3.44

$                 (1.96)

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

(0.06)

0.33

Operating income (loss)

$                  3.50

$                 (2.29)

Combined ratio

89.3 %

119.2 %

Effect of estimated prior periods' loss development

0.6 %

4.0 %

Combined ratio-accident period basis ^(c)

89.9 %

123.1 %

(a)

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

(b)

Based on federal statutory rate of 21%.

(c)

Combined ratio-accident period basis for the three months ended March 31, 2025 does not sum due to rounding.