Mercury General Corporation Announces First Quarter Results and Declares Quarterly Dividend

Consolidated Highlights

Three Months Ended March 31,

Change

2024

2023

$

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

Net premiums earned 

$     1,166,679

$     1,004,704

$     161,975

16.1

Net premiums written ⁽¹⁾ 

$     1,284,984

$     1,010,202

$     274,782

27.2

Net realized investment gains, net of tax ⁽²⁾

$          30,172

$          38,716

$        (8,544)

(22.1)

Net income (loss)

$          73,462

$         (45,288)

$     118,750

NM

Net income (loss) per diluted share

$              1.33

$             (0.82)

$           2.15

NM

Operating income (loss) ⁽¹⁾

$          43,290

$         (84,004)

$     127,294

NM

Operating income (loss) per diluted share ⁽¹⁾

$              0.78

$             (1.52)

$             2.3

NM

Catastrophe losses net of reinsurance ⁽³⁾

$          72,000

$          98,000

$      (26,000)

(26.5)

Combined ratio ⁽⁴⁾

100.9 %

115.8 %

—

(14.9) 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 realized investment gains before tax were $38 million and $49 million for the three months ended March 31, 2024 and 2023, 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.

(3)

The majority of 2024 catastrophe losses resulted from winter storms and rainstorms in California and convective storms in Texas and Oklahoma. The majority of 2023 catastrophe losses resulted from winter storms and rainstorms in California, Texas and Oklahoma.

(4)

The Company experienced favorable development of approximately $6 million and $15 million on prior accident years' loss and loss adjustment expense reserves for the three months ended March 31, 2024 and 2023, respectively. The favorable development for the first quarter of 2024 was primarily attributable to lower than estimated loss adjustment expenses in the private passenger automobile line of insurance business, partially offset by unfavorable development on prior years' catastrophe losses. The favorable development for the first quarter of 2023 was primarily attributable to lower than estimated losses and loss adjustment expenses in the homeowners line of insurance business.

Investment Results

Three Months Ended March 31,

2024

2023

(000's except average annual yield)

Average invested assets at cost ⁽¹⁾

$              5,358,848

$              5,022,572

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

     Before income taxes

$                   65,018

$                   51,973

     After income taxes

$                   54,880

$                   44,795

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

     Before income taxes

4.4 %

4.0 %

     After income taxes

3.8 %

3.5 %

(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 approximately $5.6 million and $1.7 million of interest income earned on cash (approximately $4.5 million and $1.4 million after tax) for the three months ended March 31, 2024 and 2023, 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, 2024 compared to the corresponding period in 2023 resulted largely from higher average yield combined with higher average invested assets and cash. Average annual yield on investments before and after income taxes for the three months ended March 31, 2024 increased compared to the corresponding period in 2023, primarily due to the maturity and replacement of lower yielding investments purchased when market interest rates were lower with higher yielding investments, as a result of increasing overall market interest rates, as well as higher yields on investments based on floating 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,

2024

2023

Revenues:

     Net premiums earned

$              1,166,679

$              1,004,704

     Net investment income

65,018

51,973

     Net realized investment gains

38,192

49,008

     Other

4,196

894

          Total revenues

1,274,085

1,106,579

Expenses:

     Losses and loss adjustment expenses

903,965

929,529

     Policy acquisition costs

196,040

164,507

     Other operating expenses

77,087

69,690

     Interest

7,773

4,931

          Total expenses

1,184,865

1,168,657

Income (loss) before income taxes

89,220

(62,078)

     Income tax expense (benefit)

15,758

(16,790)

                    Net income (loss)

$                   73,462

$                 (45,288)

Basic average shares outstanding

55,371

55,371

Diluted average shares outstanding

55,372

55,371

Basic Per Share Data

Net income (loss)

$                       1.33

$                     (0.82)

Net realized investment gains, net of tax

$                       0.54

$                      0.70

Diluted Per Share Data

Net income (loss)

$                       1.33

$                     (0.82)

Net realized investment gains, net of tax

$                       0.54

$                      0.70

Operating Ratios-GAAP Basis

Loss ratio

77.5 %

92.5 %

Expense ratio

23.4 %

23.3 %

Combined ratio

100.9 %

115.8 %

MERCURY GENERAL CORPORATION AND SUBSIDIARIES
CONDENSED BALANCE SHEETS AND OTHER INFORMATION
(000's except per-share amounts and ratios)

March 31, 2024

December 31, 2023

(unaudited)

ASSETS

Investments, at fair value:

     Fixed maturity securities (amortized cost $4,574,492; $4,394,983)

$             4,489,552

$             4,319,336

     Equity securities (cost $690,856; $654,939)

801,108

730,693

     Short-term investments (cost $163,454; $179,375)

162,466

178,491

          Total investments

5,453,126

5,228,520

Cash

530,085

550,903

Receivables:

     Premiums

682,473

607,025

          Allowance for credit losses on premiums receivable

(5,800)

(5,300)

                  Premiums receivable, net of allowance for credit losses

676,673

601,725

     Accrued investment income

61,198

59,128

     Other

30,040

25,603

          Total receivables

767,911

686,456

Reinsurance recoverables (net of allowance for credit losses $0; $12)

29,964

31,947

Deferred policy acquisition costs

307,938

293,844

Fixed assets, net

152,462

151,183

Operating lease right-of-use assets

14,371

14,406

Current income taxes

—

4,081

Deferred income taxes

31,367

33,013

Goodwill

42,796

42,796

Other intangible assets, net

8,353

8,333

Other assets

57,595

57,915

          Total assets

$             7,395,968

$             7,103,397

LIABILITIES AND SHAREHOLDERS' EQUITY

Loss and loss adjustment expense reserves

$             2,859,220

$             2,785,702

Unearned premiums

1,854,184

1,735,660

Notes payable

573,829

573,729

Accounts payable and accrued expenses

178,086

175,219

Operating lease liabilities

14,425

14,231

Current income taxes

6,628

—

Other liabilities

305,569

270,711

Shareholders' equity

1,604,027

1,548,145

          Total liabilities and shareholders' equity

$             7,395,968

$             7,103,397

OTHER INFORMATION

Common stock shares outstanding

55,371

55,371

Book value per share

$                    28.97

$                    27.96

Statutory surplus ^(a)

$1.70 billion

$1.67 billion

Net premiums written to surplus ratio ^(a)

2.79

2.68

Debt to total capital ratio ^(b)

26.4 %

27.1 %

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

2.9 years

3.0 years

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

     Personal Auto PIF

1,030

1,032

     Homeowners PIF

780

760

     Commercial Auto PIF

43

42

(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 March 31,

2024

2023

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

Net premiums earned

$                1,166,679

$                1,004,704

Change in net unearned premiums

118,305

5,498

Net premiums written

$                1,284,984

$                1,010,202

Incurred losses and loss adjustment expenses

$                   903,965

$                   929,529

Change in net loss and loss adjustment expense reserves

(75,419)

(87,672)

Paid losses and loss adjustment expenses

$                   828,546

$                   841,857

Net income (loss)

$                     73,462

$                   (45,288)

Less: Net realized investment gains

38,192

49,008

         Tax on net realized investment gains^(b)

8,020

10,292

             Net realized investment gains, net of tax

30,172

38,716

Operating income (loss)

$                     43,290

$                   (84,004)

Per diluted share:

Net income (loss)

$                         1.33

$                       (0.82)

Less: Net realized investment gains, net of tax

0.54

0.70

Operating income (loss) ^(c)

$                         0.78

$                       (1.52)

Combined ratio

100.9 %

115.8 %

Effect of estimated prior periods' loss development

0.5 %

1.5 %

Combined ratio-accident period basis

101.4 %

117.3 %

(a)

See "Information Regarding GAAP and Non-GAAP Measures" on page 7. 

(b)

Based on federal statutory rate of 21%.

(c)

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