Mercury General Corporation Announces Second Quarter Results and Declares Quarterly Dividend

Consolidated Highlights

Three Months Ended June 30,

Change

Six Months Ended June 30,

Change

2026

2025

$

%

2026

2025

$

%

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

Net premiums earned ⁽²⁾

$ 1,497,767

$           1,366,738

$ 131,029

9.6

$           2,950,180

$           2,649,808

$   300,372

11.3

Net premiums written ^{(1) (2)} 

$ 1,559,045

$           1,480,807

$   78,238

5.3

$           3,109,163

$           2,795,188

$   313,975

11.2

Direct premiums written ⁽¹⁾

$ 1,623,583

$           1,484,985

$ 138,598

9.3

$           3,196,324

$           2,930,428

$   265,896

9.1

Net realized investment gains, net of tax ⁽³⁾

$      68,344

$                18,549

$   49,795

268.5

$                64,756

$                36,973

$     27,783

75.1

Net income

$    263,502

$              166,472

$   97,030

58.3

$              453,922

$                58,145

$   395,777

680.7

Net income per diluted share

$          4.76

$                    3.01

$       1.75

58.1

$                    8.20

$                    1.05

$         7.15

681.0

Operating income ⁽¹⁾

$    195,158

$              147,923

$   47,235

31.9

$              389,166

$                21,172

$   367,994

1,738.1

Operating income per diluted share ⁽¹⁾

$          3.52

$                    2.67

$       0.85

31.8

$                    7.03

$                    0.38

$         6.65

1,750.0

Catastrophe losses net of reinsurance ⁽⁴⁾

$      75,000

$                13,000

$   62,000

476.9

$              168,000

$              460,000

$  (292,000)

(63.5)

Combined ratio ⁽⁵⁾

89.9 %

92.5 %

—

(2.6) pts

89.6 %

105.4 %

—

(15.8) 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 ceded premiums earned related to reinstatement premiums. 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 $87 million and $23 million for the three months ended June 30, 2026 and 2025, respectively, and $82 million and $47 million for the six months ended June 30, 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 approximately $80 million of adverse reserve development on the Palisades and Eaton wildfires, and approximately $72 million of losses from storms in Texas and Oklahoma. The majority of 2025 catastrophe losses resulted from the Palisades and Eaton wildfires in California and storms in Texas and Oklahoma.

(5)

The Company experienced favorable development of approximately $35 million and unfavorable development of approximately $4 million on prior accident years' loss and loss adjustment expense reserves for the three months ended June 30, 2026 and 2025, respectively, and favorable development of approximately $44 million and $47 million on prior accident years' loss and loss adjustment expense reserves for the six months ended June 30, 2026 and 2025, respectively. The year-to-date favorable development in 2026 was primarily attributable to lower than estimated losses and loss adjustment expenses in the automobile line of insurance business, partially offset by adverse development on the homeowners line of insurance business. 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 and homeowners lines of insurance business.

Investment Results

Three Months Ended June 30,

Six Months Ended June 30,

2026

2025

2026

2025

(000's except average annual yield)

Average invested assets at cost ⁽¹⁾

$    6,887,886

$    5,703,599

$    6,764,700

$  5,686,645

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

     Before income taxes

$         89,763

$         78,759

$       175,399

$     160,238

     After income taxes

$         76,622

$         66,021

$       149,482

$     133,872

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

     Before income taxes

4.5 %

4.7 %

4.5 %

4.7 %

     After income taxes

3.9 %

3.9 %

3.9 %

4.0 %

(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 $11.9 million and $12.5 million ($9.4 million and $9.9 million after tax) for the three months ended June 30, 2026 and 2025, respectively, and approximately $23.1 million and $25.6 million ($18.2 million and $20.2 million after tax) for the six months ended June 30, 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 and six months ended June 30, 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 June 30, 2026 decreased from the corresponding period in 2025, primarily due to an increase in tax-exempt investments with lower pre-tax yields. Average annual yield on investments before income taxes for the six months ended June 30, 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 six months ended June 30, 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 June 30,

Six Months Ended June 30,

2026

2025

2026

2025

Revenues:

     Net premiums earned

$      1,497,767

$      1,366,738

$      2,950,180

$      2,649,808

     Net investment income

89,763

78,759

175,399

160,238

     Net realized investment gains

86,512

23,480

81,970

46,801

     Other

7,723

8,908

14,026

14,916

          Total revenues

1,681,765

1,477,885

3,221,575

2,871,763

Expenses:

     Losses and loss adjustment expenses   

973,280

940,037

1,906,231

2,160,850

     Policy acquisition costs

250,328

227,880

490,830

456,601

     Other operating expenses

122,918

96,025

246,805

175,478

     Interest

7,909

7,195

14,726

14,383

          Total expenses

1,354,435

1,271,137

2,658,592

2,807,312

Income before income taxes

327,330

206,748

562,983

64,451

     Income tax expense

63,828

40,276

109,061

6,306

                    Net income

$        263,502

$        166,472

$        453,922

$          58,145

Basic average shares outstanding

55,389

55,389

55,389

55,389

Diluted average shares outstanding

55,389

55,389

55,389

55,389

Basic Per Share Data

Net income

$              4.76

$              3.01

$              8.20

$              1.05

Net realized investment gains, net of tax

$              1.23

$              0.33

$              1.17

$              0.67

Diluted Per Share Data

Net income

$              4.76

$              3.01

$              8.20

$              1.05

Net realized investment gains, net of tax

$              1.23

$              0.33

$              1.17

$              0.67

Operating Ratios-GAAP Basis

Loss ratio

65.0 %

68.8 %

64.6 %

81.5 %

Expense ratio

24.9 %

23.7 %

25.0 %

23.9 %

Combined ratio

89.9 %

92.5 %

89.6 %

105.4 %

MERCURY GENERAL CORPORATION AND SUBSIDIARIES

CONDENSED BALANCE SHEETS AND OTHER INFORMATION

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

June 30, 2026

December 31, 2025

ASSETS

Investments, at fair value:

     Fixed maturity securities (amortized cost $5,802,102; $5,449,726)   

$        5,788,544

$        5,430,251

     Equity securities (cost $860,929; $728,460)

974,212

812,787

     Short-term investments (cost $368,338; $336,978)

368,357

336,992

          Total investments

7,131,113

6,580,030

Cash

1,700,830

1,315,574

Receivables:

     Premiums

828,516

751,554

          Allowance for credit losses on premiums receivable

(5,800)

(6,000)

                  Premiums receivable, net of allowance for credit losses

822,716

745,554

     Accrued investment income

74,730

73,004

     Other

78,067

86,508

          Total receivables

975,513

905,066

Reinsurance recoverables (net of allowance for credit losses $1; $39)

44,249

109,672

Deferred policy acquisition costs

378,014

359,724

Fixed assets, net

151,109

146,880

Operating lease right-of-use assets

18,977

12,125

Deferred income taxes

23,861

30,637

Goodwill

42,796

42,796

Other intangible assets, net

6,399

6,827

Other assets

69,504

51,338

          Total assets

$       10,542,365

$        9,560,669

LIABILITIES AND SHAREHOLDERS' EQUITY

Loss and loss adjustment expense reserves

$         3,674,700

$        3,633,338

Unearned premiums

2,414,836

2,255,935

Notes payable

943,752

574,527

Accounts payable and accrued expenses

422,764

448,703

Operating lease liabilities

18,376

12,328

Current income taxes

2,947

30,770

Other liabilities

228,965

187,793

Shareholders' equity

2,836,025

2,417,275

          Total liabilities and shareholders' equity

$       10,542,365

$        9,560,669

OTHER INFORMATION

Common stock shares outstanding

55,389

55,389

Book value per share

$                51.20

$               43.64

Statutory surplus ^(a)

$2.77 billion

$2.39 billion

Net premiums written to surplus ratio ^(a)

2.18

2.39

Debt to total capital ratio ^(b)

25.1 %

19.2 %

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

4.1 years

4.4 years

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

     Personal Auto PIF

1,070

1,044

     Homeowners PIF

938

883

     Commercial Auto PIF

34

34

     All Other PIF ^(d)

318

304

          Total PIF

2,360

2,265

(a) 

Unaudited.

(b) 

Debt to Debt plus Shareholders' Equity (Debt at face value). The Company redeemed its $375 million senior notes on July 13, 2026 using the proceeds from its new $525 million senior notes issued on June 12, 2026. Had the $375 million senior notes been redeemed on June 30, 2026, the debt to total capital ratio at June 30, 2026 would have been 16.9%.

(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 six months ended June 30, 2026.

SUPPLEMENTAL SCHEDULES

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

(unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2026

2025

2026

2025

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

Net premiums earned

$   1,497,767

$   1,366,738

$ 2,950,180

$ 2,649,808

Change in net unearned premiums

61,278

114,069

158,983

145,380

Net premiums written

$   1,559,045

$   1,480,807

$ 3,109,163

$ 2,795,188

Assumed premiums written

1,977

238

(37,988)

(25,494)

Ceded premiums written

62,561

3,940

125,149

160,734

Direct premiums written

$   1,623,583

$   1,484,985

$ 3,196,324

$ 2,930,428

Incurred losses and loss adjustment expenses

$      973,280

$      940,037

$ 1,906,231

$ 2,160,850

Change in net loss and loss adjustment expense reserves   

(28,229)

(41,322)

(41,652)

(326,434)

Paid losses and loss adjustment expenses

$      945,051

$      898,715

$ 1,864,579

$ 1,834,416

Net income

$      263,502

$      166,472

$    453,922

$      58,145

Less: Net realized investment gains

86,512

23,480

81,970

46,801

         Tax on net realized investment gains ^(b)

18,168

4,931

17,214

9,828

             Net realized investment gains, net of tax

68,344

18,549

64,756

36,973

Operating income

$      195,158

$      147,923

$    389,166

$      21,172

Per diluted share:

Net income

$            4.76

$            3.01

$          8.20

$         1.05

Less: Net realized investment gains, net of tax

1.23

0.33

1.17

0.67

Operating income ^(c)

$            3.52

$            2.67

$          7.03

$         0.38

Combined ratio

89.6 %

105.4 %

Effect of estimated prior periods' loss development

1.5 %

1.8 %

Combined ratio-accident period basis

91.1 %

107.2 %

(a)

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

(b) 

Based on federal statutory rate of 21%.

(c)

Operating income per diluted share for each of the three months ended June 30, 2026 and 2025 does not sum due to rounding.