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Mercury General Q1 2025 Earnings Report
Mercury General Corporation reported a net loss in Q1 2025, primarily due to a significant increase in catastrophe losses from Southern California wildfires.
Key Takeaways
Mercury General Corporation experienced a substantial net loss of $108.3 million in the first quarter of 2025, a significant decline from a net income of $73.5 million in the prior year. This downturn was largely driven by a dramatic increase in catastrophe losses, which surged to $447 million from $72 million in Q1 2024, primarily due to Southern California wildfires. Despite an increase in net premiums earned, the combined ratio worsened considerably, indicating a less profitable underwriting performance.
Net premiums earned increased by 10.0% to $1.28 billion in Q1 2025, reflecting growth in the core insurance business.
The company reported a net loss of $108.3 million, a significant reversal from a net income of $73.5 million in the same period last year.
Catastrophe losses net of reinsurance soared by 520.8% to $447 million, primarily due to Southern California wildfires.
The combined ratio deteriorated to 119.2%, up from 100.9% in Q1 2024, indicating higher underwriting losses.
Mercury General
Mercury General
Mercury General Revenue by Segment
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Net Premiums Earned Revenue
CapyFin.comNet Investment Income Revenue
CapyFin.comRealized Investment Gains Revenue
CapyFin.comOther Revenue
CapyFin.com Forward Guidance
The company is actively pursuing subrogation against Southern California Edison (SCE) for the Eaton fire, with an estimated recovery of $525 million. They also anticipate earning approximately $50 million of reinstatement premiums in Q2 2025. The company retains the ability to consider the Palisades and Eaton fires as two separate events for reinsurance purposes, which could impact future net catastrophe losses and reinstatement premiums.
Positive Outlook
- Active pursuit of subrogation against SCE for Eaton fire with an estimated recovery of $525 million.
- Anticipated earning of approximately $50 million in reinstatement premiums in Q2 2025.
- Flexibility to treat Palisades and Eaton fires as two separate events for reinsurance, potentially impacting future net catastrophe losses.
- Favorable development of $51 million on prior accident years' loss and loss adjustment expense reserves in Q1 2025, primarily in the automobile line.
- The company has collected 100% on its initial billing of $606 million to reinsurers for the January 2025 wildfires.
Challenges Ahead
- Significant increase in catastrophe losses from Southern California wildfires in Q1 2025.
- The full $1,290 million reinsurance limits for the Palisades and Eaton fires were exhausted in Q1 2025.
- Total reinstatement premium for the exhausted limits would be approximately $101 million.
- The company's share of FAIR Plan losses from the January 2025 wildfires was approximately $108 million.
- The company was assessed $50 million by the FAIR Plan to strengthen its capital position, with only $25 million recoupable via surcharge.