Consolidated Highlights

Three Months Ended

December 31,

Change

Twelve Months Ended

December 31,

Change

2025

2024

$

%

2025

2024

$

%

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

Net premiums earned ⁽²⁾

$  1,445,404

$  1,352,101

$     93,303

6.9 %

$  5,505,613

$  5,075,456

$  430,157

8.5 %

Net premiums written ^{(1) (2)}

$  1,427,731

$  1,314,933

$   112,798

8.6 %

$  5,721,778

$  5,378,310

$  343,468

6.4 %

Direct premiums written ⁽¹⁾

$  1,490,371

$  1,346,718

$   143,653

10.7 %

$  5,982,537

$  5,500,835

$  481,702

8.8 %

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

$             92

$     (52,823)

$     52,915

NM

$     103,781

$      70,050

$    33,731

48.2 %

Net income

$    202,547

$    101,068

$   101,479

100.4 %

$     541,094

$    467,953

$    73,141

15.6 %

Net income per diluted share

$          3.66

$          1.82

$         1.84

101.1 %

$           9.77

$          8.45

$        1.32

15.6 %

Operating income ⁽¹⁾

$   202,455

$   153,891

$     48,564

31.6 %

$    437,313

$    397,903

$    39,410

9.9 %

Operating income per diluted share ⁽¹⁾

$         3.66

$         2.78

$         0.88

31.7 %

$          7.90

$          7.19

$        0.71

9.9 %

Catastrophe losses net of reinsurance ⁽⁴⁾

$     19,000

$     41,000

$    (22,000)

(53.7) %

$    508,000

$    277,000

$  231,000

83.4 %

Combined ratio ⁽⁵⁾

88.6 %

91.4 %

—

   (2.8) pts

96.3 %

96.0 %

—

      0.3 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⁾

Both net premiums earned and net premiums written for the twelve months ended December 31, 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 the Company's catastrophe reinsurance treaty ending June 30, 2025 following the Palisades and Eaton wildfires in January 2025.  

⁽³⁾

Net realized investment gains (losses) before tax were $0.1 million and $(66.9) million for the three months ended December 31, 2025 and 2024, respectively, and $131.4 million and $88.7 million for the twelve months ended December 31, 2025 and 2024, 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 for its investments as permitted under GAAP.

⁽⁴⁾

The majority of 2025 catastrophe losses resulted from from the Palisades and Eaton wildfires in California and severe storms in Texas, Oklahoma and California. The majority of 2024 catastrophe losses resulted from tornadoes, hailstorms and convective storms in Texas and Oklahoma, winter storms, rainstorms and wildfires in California, and the impact of Hurricane Helene in Florida and Georgia. 

⁽⁵⁾

The Company experienced favorable development of approximately $18 million and unfavorable development of approximately $8 million on prior accident years' loss and loss adjustment expense reserves for the three months ended December 31, 2025 and 2024, respectively, and favorable development of approximately $92 million and unfavorable development of approximately $25 million on prior accident years' loss and loss adjustment expense reserves for the twelve months ended December 31, 2025 and 2024, respectively. 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 year-to-date unfavorable development in 2024 was primarily attributable to higher than estimated losses and loss adjustment expenses in the commercial automobile and commercial property lines of insurance business, partially offset by favorable reserve development in the private passenger automobile line of insurance business. 

Investment Results

Three Months Ended

December 31,

Twelve Months Ended

December 31,

2025

2024

2025

2024

(000's except average annual yield)

Average invested assets at cost ⁽¹⁾

$    6,367,236

$  6,023,948

$   5,968,575

$     5,683,973

Net investment income ⁽²⁾⁽³⁾

     Before income taxes

$         84,493

$       73,262

$      328,701

$        279,989

     After income taxes

$         71,598

$       61,491

$      276,214

$        235,419

Average annual yield on investments - after income taxes ⁽²⁾⁽³⁾

3.9 %

3.7 %

4.0 %

3.8 %

⁽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 for each period.

⁽²⁾

Net investment income includes interest income earned on cash of $12.3 million and $6.9 million ($9.7 million and $5.4 million after tax) for the three months ended December 31, 2025 and 2024, respectively, and $50.7 million and $25.5 million ($40.1 million and $20.2 million after tax) for the twelve months ended December 31, 2025 and 2024, respectively. Average annual yield on investments does not include interest income earned on cash.

⁽³⁾

The higher net investment income before and after income taxes for the three and twelve months ended December 31, 2025 compared to the corresponding periods in 2024 resulted largely from higher average invested assets and cash combined with higher average yield. Average annual yield on investments after income taxes for the three and twelve months ended December 31, 2025 increased compared to the corresponding periods in 2024, primarily due to the maturity and replacement of lower yielding investments purchased when market interest rates were lower with higher yielding investments, combined with the higher average yield on investments purchased in 2025 using cash generated from operations compared to the average yield on overall investments in 2024. 

For the Twelve

Months Ended

December 31, 2025

(Amounts in

thousands)

Gross losses and loss adjustment expenses

$            2,191,752

Subrogation recoverable - Eaton fire ^{(1) ***}

(537,506)

Subrogation recovered and recoverable - Palisades fire ^{(2) ***}

(48,026)

Reinsurance recovered and recoverable ⁽³⁾

(1,293,500)

Net catastrophe losses and loss adjustment expenses on Eaton and Palisades fires before FAIR Plan

$               312,720

Company's share of FAIR Plan losses and loss adjustment expenses ⁽⁴⁾

$                 92,717

Recoupable portion of FAIR Plan losses and loss adjustment expenses ⁽⁵⁾

(25,000)

Net FAIR Plan losses and loss adjustment expenses

$                 67,717

Net losses and loss adjustment expenses on Eaton and Palisades fires

$               380,437

__________ 

⁽¹⁾

The Company is actively pursuing subrogation against Southern California Edison ("SCE") on the Eaton fire. The Company recorded approximately $538 million in estimated subrogation recoveries, or approximately 55% of its estimated ultimate losses on the Eaton fire, as an offset against loss and loss adjustment expense reserves in its consolidated balance sheet at December 31, 2025, and thereby reduced losses and loss adjustment expenses by the same amount in its consolidated statement of operations for the year ended December 31, 2025. 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. In addition, 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. For utility-caused California wildfires occurring since 2017 through 2024 where SCE and other utility companies settled the subrogation claims without admitting fault, such companies have paid out average amounts equal to over 60% of the losses incurred with a range as low as 55% to over 70%. The Company believes that SCE has the wherewithal to settle the subrogation claims on the Eaton fire in a similar range of settlement amounts as on the recent past wildfires. SCE also has access to the California Wildfire Fund (the "Fund") that provides additional funding to reimburse member utilities to pay wildfire claims; furthermore, SCE has stated that the administrator of the Fund has confirmed that the Eaton fire is a covered wildfire for purposes of accessing the Fund. Based on the grounds described above as well as management's estimates and assumptions derived from industry experience, including recent market interest in the acquisition of the Company's subrogation rights on the Eaton fire, the Company believes $538 million is a reasonable estimate of probable recovery on the Eaton fire. 

⁽²⁾

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 ("Upside Recovery'). The recovery amount from the guaranteed percentage of losses is approximately $48 million, with $31 million received as of December 31, 2025. The remaining balance of approximately $17 million at December 31, 2025 will be settled each quarter based on the amount of claims payments the Company makes subsequent to the previous settlement date. The Company recorded the total sale price of approximately $48 million as an offset against losses and loss adjustment expenses in its consolidated statement of operations for the year ended December 31, 2025. The Company did not record an amount for the potential Upside Recovery.

⁽³⁾

The Company's catastrophe reinsurance program for the treaty year ended June 30, 2025 provides approximately $1,290 million of limits on a per occurrence basis after covered catastrophe losses exceed the Company's retention of $150 million. It also allows the Company to consider catastrophe events that occur within a 150-mile radius as a single occurrence or separate occurrences for reinsurance purposes. The Company treated the Palisades and Eaton wildfires as one event for reinsurance purposes exhausting the full $1,290 million of limits. The $1,290 million of limits used for the Palisades and Eaton wildfires was reduced by $6.5 million for ineligible parametric coverage. The Company also utilized $10 million from a separate property excess of loss reinsurance treaty making the total reinsurance used for the Palisades and Eaton wildfires approximately $1,294 million.

⁽⁴⁾

The Company is a member of the California FAIR Plan, the state's fire insurer of last resort. To the extent the FAIR Plan has losses exceeding its capital and reinsurance coverage, the FAIR Plan can assess its member companies for the shortfall based on each company's California market share. The FAIR Plan had significant losses from the Palisades and Eaton wildfires, and the Company's share of the FAIR Plan losses from the Palisades and Eaton wildfires was approximately $93 million (an amount based on information provided to the Company directly from the FAIR Plan), which was recorded as part of the Company's losses and loss adjustment expenses from the Palisades and Eaton wildfires in its consolidated statement of operations for the year ended December 31, 2025.

⁽⁵⁾

The FAIR Plan assessed the Company $50 million to strengthen the FAIR Plan's capital position following the Palisades and Eaton wildfires in the first quarter of 2025. The California DOI allows for recoupment of 50% or $25 million of the $50 million assessment via a temporary surcharge to the Company's policyholders. The Company has received approval from the California DOI to recoup the $25 million, which partially offset the Company's share of the FAIR Plan's losses of $93 million. Accordingly, the Company recorded a net loss of approximately $68 million for its share of the FAIR Plan's losses from the Palisades and Eaton wildfires in its consolidated statement of operations for the year ended December 31, 2025.

***

Accounting Standards Codification ("ASC") 944-40-30-2 through 3 and Statement of Statutory Accounting Principles ("SSAP") No. 55 paragraph 15 require salvage and subrogation recoverables to be deducted from the liability for unpaid claims; therefore, loss and loss adjustment expense reserves on the Company's consolidated balance sheets is shown net of estimated salvage and subrogation recoverables, and losses and loss adjustment expenses on its consolidated statements of operations is shown net of salvage and subrogation. The Company applies this accounting method for salvage and subrogation in a consistent manner for both GAAP and statutory reporting purposes.

MERCURY GENERAL CORPORATION AND SUBSIDIARIES

SUMMARY OF OPERATING RESULTS

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

(unaudited)

Three Months Ended

December 31,

Twelve Months Ended

December 31,

2025

2024

2025

2024

Revenues:

     Net premiums earned

$    1,445,404

$ 1,352,101

$   5,505,613

$   5,075,456

     Net investment income

84,493

73,262

328,701

279,989

     Net realized investment gains (losses)

117

(66,865)

131,368

88,671

     Other

5,765

7,682

26,786

31,517

          Total revenues

$    1,535,779

$ 1,366,180

$   5,992,468

$   5,475,633

Expenses:

     Losses and loss adjustment expenses

919,435

925,394

3,963,031

3,684,511

     Policy acquisition costs

250,174

228,245

942,939

858,261

     Other operating expenses

110,231

81,506

394,226

327,157

     Interest

7,060

7,536

28,623

30,824

          Total expenses

$    1,286,900

$ 1,242,681

$   5,328,819

$   4,900,753

Income before income taxes

248,879

123,499

663,649

574,880

     Income tax expense

46,332

22,431

122,555

106,927

                    Net income

$       202,547

$    101,068

$      541,094

$      467,953

Basic average shares outstanding

55,389

55,378

55,389

55,373

Diluted average shares outstanding

55,389

55,382

55,389

55,377

Basic Per Share Data

Net income

$             3.66

$          1.83

$            9.77

$            8.45

Net realized investment gains (losses), net of tax

$                —

$        (0.95)

$            1.87

$            1.27

Diluted Per Share Data

Net income

$             3.66

$          1.82

$            9.77

$            8.45

Net realized investment gains (losses), net of tax

$                —

$        (0.95)

$            1.87

$            1.26

Operating Ratios-GAAP Basis

Loss ratio

63.6 %

68.4 %

72.0 %

72.6 %

Expense ratio

24.9 %

22.9 %

24.3 %

23.4 %

Combined ratio ^(a)

88.6 %

91.4 %

96.3 %

96.0 %

(a)         Combined ratios for the three months ended December 31, 2025 and 2024 do not sum due to rounding.

MERCURY GENERAL CORPORATION AND SUBSIDIARIES

CONDENSED BALANCE SHEETS AND OTHER INFORMATION

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

December 31, 2025

December 31, 2024

(unaudited)

ASSETS

Investments, at fair value:

     Fixed maturity securities (amortized cost $5,449,726; $4,982,459)

$             5,430,251

$              4,913,378

     Equity securities (cost $728,460; $795,068)

812,787

879,175

     Short-term investments (cost $336,978; $283,792)

336,992

283,817

          Total investments

6,580,030

6,076,370

Cash

1,315,574

720,257

Receivables:

     Premiums

751,554

697,176

           Allowance for credit losses on premiums receivable

(6,000)

(6,400)

                   Premiums receivable, net of allowance for credit losses

745,554

690,776

     Accrued investment income

73,004

67,630

     Other

86,508

62,118

          Total receivables

905,066

820,524

Reinsurance recoverables (net of allowance for credit losses $39; $0)

109,672

28,613

Deferred policy acquisition costs

359,724

335,332

Fixed assets, net

146,880

138,177

Operating lease right-of-use assets

12,125

13,407

Deferred income taxes

30,637

45,854

Goodwill

42,796

42,796

Other intangible assets, net

6,827

7,682

Other assets

51,338

81,620

          Total assets

$             9,560,669

$              8,310,632

LIABILITIES AND SHAREHOLDERS' EQUITY

Loss and loss adjustment expense reserves

$             3,633,338

$              3,152,031

Unearned premiums

2,255,935

2,039,830

Notes payable

574,527

574,128

Accounts payable and accrued expenses

448,703

417,765

Operating lease liabilities

12,328

13,580

Current income taxes

30,770

20,752

Other liabilities

187,793

146,022

Shareholders' equity

2,417,275

1,946,524

          Total liabilities and shareholders' equity

$             9,560,669

$              8,310,632

OTHER INFORMATION

Common stock shares outstanding

55,389

55,389

Book value per share

$43.64

$35.14

Statutory surplus ^(a)

$2.39 billion

$2.03 billion

Net premiums written to surplus ratio ^(a)

2.39

2.65

Debt to total capital ratio ^(b)

19.2 %

22.8 %

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

4.4 years

3.4 years

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

     Personal Auto PIF

1,044

1,019

     Homeowners PIF

883

852

     Commercial Auto PIF

34

39

(a)       Unaudited.

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

(c)        Modified duration reflecting anticipated early calls.

SUPPLEMENTAL SCHEDULES

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

(unaudited)

Three Months Ended December 31,

Twelve Months Ended December 31,

2025

2024

2025

2024

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

Net premiums earned

$        1,445,404

$        1,352,101

$     5,505,613

$     5,075,456

     Change in net unearned premiums

(17,673)

(37,168)

216,165

302,854

Net premiums written

$        1,427,731

$        1,314,933

$     5,721,778

$     5,378,310

     Assumed premiums written

(128)

(108)

(26,212)

(15,489)

     Ceded premiums written

62,768

31,893

286,971

138,014

Direct premiums written

$        1,490,371

$        1,346,718

$     5,982,537

$     5,500,835

Incurred losses and loss adjustment expenses

$           919,435

$           925,394

$     3,963,031

$     3,684,511

     Change in net loss and loss adjustment expense reserves

(92,108)

(79,828)

(475,944)

(369,831)

Paid losses and loss adjustment expenses

$           827,327

$           845,566

$     3,487,087

$     3,314,680

Net income

$           202,547

$           101,068

$        541,094

$        467,953

     Net realized investment gains (losses)

117

(66,865)

131,368

88,671

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

25

(14,042)

27,587

18,621

         Net realized investment gains (losses), net of tax

92

(52,823)

103,781

70,050

Operating income

$           202,455

$           153,891

$        437,313

$        397,903

Per diluted share:

Net income

$                 3.66

$                 1.82

$              9.77

$              8.45

     Net realized investment gains (losses), net of tax

—

(0.95)

1.87

1.26

Operating income ^(c)

$                 3.66

$                 2.78

$              7.90

$              7.19

Combined ratio

96.3 %

96.0 %

     Effect of estimated prior periods' loss development

1.7 %

(0.5) %

Combined ratio-accident period basis

98.0 %

95.5 %

(a)     See "Information Regarding GAAP and Non-GAAP Measures." 

(b)     Based on federal statutory rate of 21%.

(c)     Operating income per diluted share for the three months ended December 31, 2024 does not sum due to rounding.