Mercury General Corporation Announces Third Quarter Results and Declares Quarterly Dividend

Consolidated Highlights

Three Months Ended
September 30,

Change

Nine Months Ended
September 30,

Change

2026

2025

$

%

2026

2025

$

%

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

Net premiums earned ⁽²⁾

$ 1,545,368

$           1,410,400

$ 134,968

9.6

$           4,495,548

$           4,060,208

$   435,340

10.7

Net premiums written ^{(1) (2)} 

$ 1,636,133

$           1,498,861

$ 137,272

9.2

$           4,745,297

$           4,294,048

$   451,249

10.5

Direct premiums written ⁽¹⁾

$ 1,697,598

$           1,561,739

$ 135,859

8.7

$           4,893,922

$           4,492,167

$   401,755

8.9

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

$ (206,938)

$   66,716

$(273,654)

(410.2)

$ (142,182)

$  103,688

$  (245,870)

(237.1)

Net (loss) income

$  (13,685)

$  280,403

$(294,088)

(104.9)

$  440,237

$  338,547

$   101,690

30.0

Net (loss) income per diluted share

$    (0.25)

$     5.06

$   (5.31)

(104.9)

$     7.95

$     6.11

$      1.84

30.1

Operating income ⁽¹⁾

$  193,253

$  213,687

$ (20,434)

(9.6)

$  582,419

$  234,859

$   347,560

148.0

Operating income per diluted share ⁽¹⁾

$     3.49

$     3.86

$   (0.37)

(9.6)

$    10.52

$     4.24

$      6.28

148.1

Catastrophe losses net of reinsurance ⁽⁴⁾

$   23,000

$   29,000

$  (6,000)

(20.7)

$  191,000

$  489,000

$  (298,000)

(60.9)

Combined ratio ⁽⁵⁾

90.2 %

87.0 %

—

3.2 pts

89.8 %

99.0 %

—

(9.2) 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)

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 ended June 30, 2025 following the Palisades and Eaton wildfires in January 2025.      

(3)

Net realized investment (losses) gains before tax was $(262) million and $84 million for the three months ended September 30, 2026 and 2025, respectively, and $(180) million and $131 million for the nine months ended September 30, 2026 and 2025, respectively. Net realized investment losses for the three and nine months ended September 30, 2026 resulted largely from the decreases in fair value of the Company's investments during the third quarter of 2026 primarily caused by large increases in overall market interest rates. 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 storms in Oklahoma and Texas and adverse reserve development on the Palisades and Eaton wildfires. 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 $58 million and $27 million on prior accident years' loss and loss adjustment expense reserves for the three months ended September 30, 2026 and 2025, respectively, and favorable development of approximately $102 million and $74 million on prior accident years' loss and loss adjustment expense reserves for the nine months ended September 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 primarily related to the Palisades and Eaton wildfires. 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.

Investment Results

Three Months Ended September 30,

Nine Months Ended September 30,

2026

2025

2026

2025

(000's except average annual yield)

Average invested assets at cost ⁽¹⁾

$    7,227,738

$    6,135,816

$    6,924,365

$  5,840,849

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

     Before income taxes

$       93,339

$       83,970

$      268,738

$    244,208

     After income taxes

$       79,987

$       70,745

$      229,469

$    204,616

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

     Before income taxes

4.5 %

4.6 %

4.5 %

4.7 %

     After income taxes

3.9 %

4.0 %

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 $12.0 million and $12.9 million ($9.5 million and $10.2 million after tax) for the three months ended September 30, 2026 and 2025, respectively, and approximately $35.1 million and $38.4 million ($27.7 million and $30.4 million after tax) for the nine months ended September 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 nine months ended September 30, 2026 compared to the corresponding periods in 2025 resulted largely from higher average invested assets, partially offset by decreases in average annual yield on investments and interest income earned on cash before and after taxes. Average annual yield on investments before income taxes for the three months ended September 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, partially offset by higher yields on long-term investments. Average annual yield on investments after income taxes for the three months ended September 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, partially offset by higher yields on long-term investments. Average annual yield on investments before income taxes for the nine months ended September 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 nine months ended September 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 September 30,

Nine Months Ended September 30,

2026

2025

2026

2025

Revenues:

     Net premiums earned

$      1,545,368

$      1,410,400

$      4,495,548

$      4,060,208

     Net investment income

93,339

83,970

268,738

244,208

     Net realized investment (losses) gains

(261,947)

84,451

(179,977)

131,251

     Other

4,591

6,105

18,617

21,022

          Total revenues

1,381,351

1,584,926

4,602,926

4,456,689

Expenses:

     Losses and loss adjustment expenses

1,016,582

882,745

2,922,813

3,043,596

     Policy acquisition costs

259,312

236,164

750,142

692,765

     Other operating expenses

118,165

108,518

364,970

283,996

     Interest

10,168

7,181

24,893

21,562

          Total expenses

1,404,227

1,234,608

4,062,818

4,041,919

(Loss) income before income taxes

(22,876)

350,318

540,108

414,770

     Income tax (benefit) expense

(9,191)

69,915

99,871

76,223

                    Net (loss) income

$        (13,685)

$       280,403

$       440,237

$       338,547

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 (loss) income

$          (0.25)

$           5.06

$           7.95

$           6.11

Net realized investment (losses) gains, net of tax

$          (3.74)

$           1.20

$          (2.57)

$           1.87

Diluted Per Share Data

Net (loss) income

$          (0.25)

$           5.06

$           7.95

$           6.11

Net realized investment (losses) gains, net of tax

$          (3.74)

$           1.20

$          (2.57)

$           1.87

Operating Ratios-GAAP Basis

Loss ratio

65.8 %

62.6 %

65.0 %

75.0 %

Expense ratio

24.4 %

24.4 %

24.8 %

24.1 %

Combined ratio ^(a)

90.2 %

87.0 %

89.8 %

99.0 %

(a)

Combined ratio for the nine months ended September 30, 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)

September 30, 2026

December 31, 2025

ASSETS

Investments, at fair value:

     Fixed maturity securities (amortized cost $6,268,600; $5,449,726)

$        6,013,700

$        5,430,251

     Equity securities (cost $897,915; $728,460)

989,325

812,787

     Short-term investments (cost $226,648; $336,978)

226,672

336,992

          Total investments

7,229,697

6,580,030

Cash

1,305,215

1,315,574

Receivables:

     Premiums

856,234

751,554

          Allowance for credit losses on premiums receivable

(5,400)

(6,000)

                  Premiums receivable, net of allowance for credit losses

850,834

745,554

     Accrued investment income

81,382

73,004

     Other

80,496

86,508

          Total receivables

1,012,712

905,066

Reinsurance recoverables (net of allowance for credit losses $3; $39)

45,392

109,672

Deferred policy acquisition costs

391,878

359,724

Fixed assets, net

148,538

146,880

Operating lease right-of-use assets

18,472

12,125

Deferred income taxes

87,604

30,637

Goodwill

42,796

42,796

Other intangible assets, net

6,185

6,827

Other assets

60,562

51,338

          Total assets

$       10,349,051

$        9,560,669

LIABILITIES AND SHAREHOLDERS' EQUITY

Loss and loss adjustment expense reserves

$        3,754,561

$        3,633,338

Unearned premiums

2,505,959

2,255,935

Notes payable

569,005

574,527

Accounts payable and accrued expenses

474,649

448,703

Operating lease liabilities

17,953

12,328

Current income taxes

344

30,770

Other liabilities

221,826

187,793

Shareholders' equity

2,804,754

2,417,275

          Total liabilities and shareholders' equity

$       10,349,051

$        9,560,669

OTHER INFORMATION

Common stock shares outstanding

55,389

55,389

Book value per share

$             50.64

$             43.64

Statutory surplus ^(a)

$2.88 billion

$2.39 billion

Net premiums written to surplus ratio ^(a)

2.14

2.39

Debt to total capital ratio ^(b)

17.0 %

19.2 %

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

6.2 years

4.4 years

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

     Personal Auto PIF

1,085

1,044

     Homeowners PIF

968

883

     Commercial Auto PIF

35

34

     All Other PIF ^(d)

326

304

          Total PIF

2,414

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 6.3% of the total company-wide direct premiums written for the nine months ended September 30, 2026.

SUPPLEMENTAL SCHEDULES

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

(unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2026

2025

2026

2025

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

Net premiums earned

$    1,545,368

$    1,410,400

$  4,495,548

$  4,060,208

Change in net unearned premiums

90,765

88,461

249,749

233,840

Net premiums written

$    1,636,133

$    1,498,861

$  4,745,297

$  4,294,048

Assumed premiums written

(494)

(589)

(38,482)

(26,084)

Ceded premiums written

61,959

63,467

187,107

224,203

Direct premiums written

$    1,697,598

$    1,561,739

$  4,893,922

$  4,492,167

Incurred losses and loss adjustment expenses

$    1,016,582

$      882,745

$  2,922,813

$  3,043,596

Change in net loss and loss adjustment expense reserves

(75,092)

(57,401)

(116,744)

(383,836)

Paid losses and loss adjustment expenses

$      941,490

$      825,344

$  2,806,069

$  2,659,760

Net (loss) income

$      (13,685)

$      280,403

$    440,237

$    338,547

Less: Net realized investment (losses) gains

(261,947)

84,451

(179,977)

131,251

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

(55,009)

17,735

(37,795)

27,563

             Net realized investment (losses) gains, net of tax

(206,938)

66,716

(142,182)

103,688

Operating income

$      193,253

$      213,687

$    582,419

$    234,859

Per diluted share:

Net (loss) income

$         (0.25)

$          5.06

$        7.95

$        6.11

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

(3.74)

1.20

(2.57)

1.87

Operating income

$          3.49

$          3.86

$       10.52

$        4.24

Combined ratio

89.8 %

99.0 %

Effect of estimated prior periods' loss development

2.3 %

1.8 %

Combined ratio-accident period basis

92.1 %

100.8 %

(a)

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

(b)

Based on federal statutory rate of 21%.