Mercury General(US:MCY)2025-07-29 20:07Premiums and Revenue - For the six months ended June 30, 2025, total direct premiums written amounted to $2,930.4 million, a 9.0% increase from $2,688.4 million in the same period of 2024[138]. - California accounted for 80.9% of total direct premiums written, with $2,371.1 million in premiums, while Texas contributed 7.6% with $222.0 million[138]. - Net premiums earned increased by 10.3% and net premiums written increased by 5.9% compared to the same period in 2024[175]. - Net premiums earned for the six months ended June 30, 2025, were $2,649,808, an increase from $2,402,703 in 2024, while net premiums written rose to $2,795,188 from $2,640,444[177]. - Net premiums earned increased by 10.6% to $1,366,738 thousand for the three months ended June 30, 2025, compared to $1,236,024 thousand in 2024[162]. - Net premiums written rose by 9.2% to $1,480,807 thousand for the three months ended June 30, 2025, up from $1,355,460 thousand in 2024[162]. Loss Reserves and Ratios - The Company recorded loss reserves of approximately $3.61 billion as of June 30, 2025, up from $3.15 billion at the end of 2024, including incurred but not reported loss reserves of $2.08 billion[154]. - The loss ratio improved to 68.8% in Q2 2025 from 75.8% in Q2 2024, reflecting better underwriting performance[163]. - The combined ratio decreased to 92.5% in Q2 2025 from 98.9% in Q2 2024, indicating profitable underwriting results[168]. - The loss ratio for the first half of 2025 was 81.5%, up from 76.6% in 2024, with a combined ratio of 105.4% compared to 99.9% in the prior year[178]. Income and Investment Performance - Net income for the three months ended June 30, 2025, was $166,472 thousand, significantly up from $62,568 thousand in 2024[174]. - Net income for the six months ended June 30, 2025, was $58,145, a significant decrease from $136,030 in 2024, resulting in a basic net income per share of $1.05 compared to $2.46[189]. - Net investment income before taxes increased to $78,759 thousand in Q2 2025 from $68,970 thousand in Q2 2024, driven by higher average yield and invested assets[170]. - Net investment income before taxes increased to $160,238 in 2025 from $133,989 in 2024, with an average annual yield on investments rising to 4.7% from 4.5%[184]. Catastrophe Losses - Catastrophe losses for Q2 2025 amounted to approximately $15 million, primarily due to severe storms, while the previous year saw $120 million in catastrophe losses[164][165]. - Catastrophe losses for the first half of 2025 amounted to approximately $474 million, primarily due to wildfires and severe storms, while 2024 saw $188 million in catastrophe losses[180]. - Catastrophe events in 2025 resulted in approximately $1,783 million in losses before reinsurance, primarily from wildfires and severe storms[203]. Regulatory and Market Conditions - The Company is subject to regulatory examinations by the Department of Insurance in each state it operates, with no material findings reported in recent Texas market conduct examinations[140]. - The property and casualty insurance industry is highly cyclical, affecting the Company's ability to grow and retain business due to competition and economic conditions[135]. - The Company expects to adhere to new market-share requirements in California to incorporate catastrophe modeling and reinsurance costs into its rate-making, with implementation likely not complete until late 2025[143]. Reinsurance and Catastrophe Management - The Company contributed $50 million to the California FAIR Plan to strengthen its capital position following significant wildfire losses in January 2025[144]. - The Catastrophe Reinsurance Treaty provides approximately $2,140 million of coverage for the 12 months ending June 30, 2026, compared to $1,290 million for the same period in 2025[198]. - The annual premium for the Treaty is projected to be $237 million for the 12 months ending June 30, 2026, an increase from $105 million in 2025, primarily due to increased reinsurance coverage and rates[201]. - The Company has reduced its catastrophe exposure from earthquakes by placing risks directly with the California Earthquake Authority[194]. Investment Portfolio - The total investment portfolio at fair value as of June 30, 2025, is $5,963,247 thousand, with fixed maturity securities making up a significant portion[209]. - At June 30, 2025, 40.2% of the total investment portfolio at fair value was invested in tax-exempt state and municipal bonds[209]. - The nominal average maturity of fixed maturity securities, excluding short-term investments, is 13.3 years as of June 30, 2025[213]. - The overall credit ratings for the fixed maturity securities portfolio remained stable, with 95.5% experiencing no change in their overall rating during the six months ended June 30, 2025[216]. - The Company reported equity holdings of $687.7 million, which constituted 11.5% of the total investment portfolio at fair value as of June 30, 2025[229]. Debt and Financial Ratios - The Company’s debts included $375 million of senior unsecured notes and $200 million drawn under an unsecured credit facility as of June 30, 2025[230]. - The ratio of net premiums written to statutory policyholders' surplus was 2.74 to 1, based on a surplus of $2.02 billion and net premiums written of $5.53 billion for the twelve months ended June 30, 2025[231]. - The Company was in compliance with all financial covenants related to minimum statutory surplus and debt ratios as of June 30, 2025[230].