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What changed in MERCURY GENERAL CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of MERCURY GENERAL CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+256 added−260 removedSource: 10-K (2025-02-11) vs 10-K (2024-02-13)

Top changes in MERCURY GENERAL CORP's 2024 10-K

256 paragraphs added · 260 removed · 229 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

71 edited+11 added−9 removed79 unchanged
Biggest changeThe direct premiums written for the years ended December 31, 2023, 2022 and 2021 by state and line of insurance business were: Year Ended December 31, 2023 (Dollars in thousands) Private Passenger Automobile Homeowners Commercial Automobile Other Lines (2) Total California $ 2,317,678 $ 813,056 $ 246,253 $ 235,735 $ 3,612,722 79.3 % Texas 123,390 147,854 53,430 5,592 330,266 7.2 % Other states (1) 400,714 158,094 46,538 10,154 615,500 13.5 % Total $ 2,841,782 $ 1,119,004 $ 346,221 $ 251,481 $ 4,558,488 100.0 % 62.4 % 24.5 % 7.6 % 5.5 % 100.0 % Year Ended December 31, 2022 (Dollars in thousands) Private Passenger Automobile Homeowners Commercial Automobile Other Lines (2) Total California $ 2,142,265 $ 716,651 $ 193,809 $ 216,022 $ 3,268,747 80.8 % Texas 97,620 105,269 43,641 6,174 252,704 6.2 % Other states (1) 358,973 118,419 39,312 10,375 527,079 13.0 % Total $ 2,598,858 $ 940,339 $ 276,762 $ 232,571 $ 4,048,530 100.0 % 64.3 % 23.2 % 6.8 % 5.7 % 100.0 % Year Ended December 31, 2021 (Dollars in thousands) Private Passenger Automobile Homeowners Commercial Automobile Other Lines (2) Total California $ 2,286,017 $ 642,291 $ 181,957 $ 188,446 $ 3,298,711 84.4 % Other states (1) 354,730 159,197 77,916 16,975 608,818 15.6 % Total $ 2,640,747 $ 801,488 $ 259,873 $ 205,421 $ 3,907,529 100.0 % 67.6 % 20.5 % 6.6 % 5.3 % 100.0 % _____________ (1) No individual state accounted for more than 5% of total direct premiums written.
Biggest changeThe direct premiums written for the years ended December 31, 2024, 2023 and 2022 by state and line of insurance business were: Year Ended December 31, 2024 (Dollars in thousands) Private Passenger Automobile Homeowners Commercial Automobile Other Lines (2) Total California $ 2,845,294 $ 970,054 $ 280,987 $ 334,293 $ 4,430,628 80.5 % Texas 127,808 190,928 62,788 6,824 388,348 7.1 % Other states (1) 422,722 206,315 43,219 9,603 681,859 12.4 % Total $ 3,395,824 $ 1,367,297 $ 386,994 $ 350,720 $ 5,500,835 100.0 % 61.7 % 24.9 % 7.0 % 6.4 % 100.0 % Year Ended December 31, 2023 (Dollars in thousands) Private Passenger Automobile Homeowners Commercial Automobile Other Lines (2) Total California $ 2,317,678 $ 813,056 $ 246,253 $ 235,735 $ 3,612,722 79.3 % Texas 123,390 147,854 53,430 5,592 330,266 7.2 % Other states (1) 400,714 158,094 46,538 10,154 615,500 13.5 % Total $ 2,841,782 $ 1,119,004 $ 346,221 $ 251,481 $ 4,558,488 100.0 % 62.4 % 24.5 % 7.6 % 5.5 % 100.0 % Year Ended December 31, 2022 (Dollars in thousands) Private Passenger Automobile Homeowners Commercial Automobile Other Lines (2) Total California $ 2,142,265 $ 716,651 $ 193,809 $ 216,022 $ 3,268,747 80.8 % Texas 97,620 105,269 43,641 6,174 $ 252,704 6.2 % Other states (1) 358,973 118,419 39,312 10,375 527,079 13.0 % Total $ 2,598,858 $ 940,339 $ 276,762 $ 232,571 $ 4,048,530 100.0 % 64.3 % 23.2 % 6.8 % 5.7 % 100.0 % _____________ (1) No individual state accounted for more than 5% of total direct premiums written.
The Company sponsors a wellness program designed to enhance physical, financial and mental well-being for all of its employees, and encourages healthy behaviors through regular communications, educational sessions, voluntary progress tracking, wellness challenges, and other incentives.
The Company sponsors a wellness program designed to enhance physical, financial and mental well-being for all of its employees, and encourages healthy behaviors through regular communications, educational sessions, voluntary progress 2 tracking, wellness challenges, and other incentives.
Victor Joseph, President and Chief Operating Officer, has been employed by the Company in various capacities since 2009, and was appointed Vice President and Chief Underwriting Officer in July 2017, Executive Vice President and Chief Operating Officer in January 2022, and President and Chief Operating Officer in January 2024. Mr. Victor Joseph is Mr. George Joseph’s son. Mr.
Victor Joseph, President and Chief Operating Officer, has been employed by the Company in various capacities since 2009, and was appointed Vice President and Chief Underwriting Officer in July 2017, Executive Vice President and Chief Operating Officer in January 2022, and President and Chief Operating Officer in January 2024. Mr. Victor Joseph is Mr. George Joseph’s son. 13 Mr.
Stalick, Senior Vice President and Chief Financial Officer, joined the Company as Corporate Controller in 1997. He was appointed Chief Accounting Officer in October 2000 and Vice President and Chief Financial Officer in 2001. In July 2013, he was named Senior Vice President and Chief Financial Officer. Mr. Stalick is a Certified Public Accountant. 13 Ms.
Stalick, Senior Vice President and Chief Financial Officer, joined the Company as Corporate Controller in 1997. He was appointed Chief Accounting Officer in October 2000 and Vice President and Chief Financial Officer in 2001. In July 2013, he was named Senior Vice President and Chief Financial Officer. Mr. Stalick is a Certified Public Accountant. Ms.
The Holding Company Act also provides that the acquisition or change of "control" of a California domiciled insurance company or of any person who controls such an insurance company cannot be consummated without the prior approval of the 12 California DOI.
The Holding Company Act also provides that the acquisition or change of "control" of a California domiciled insurance company or of any person who controls such an insurance company cannot be consummated without the prior approval of the California DOI.
Management’s Discussion and Analysis of Financial Condition and Results of Operations." 11 Own Risk and Solvency Assessment Insurance companies are required to file an Own Risk and Solvency Assessment ("ORSA") with the insurance regulators in their domiciliary states.
Management’s Discussion and Analysis of Financial Condition and Results of Operations." Own Risk and Solvency Assessment Insurance companies are required to file an Own Risk and Solvency Assessment ("ORSA") with the insurance regulators in their domiciliary states.
Coverage on individual catastrophes provided for the 12 months ending June 30, 2024 under the Treaty is presented below in various layers: Catastrophe Losses and LAE In Excess of Up to Percentage of Coverage (Amounts in millions) Retained $ — $ 100 — % Layer of Coverage 100 140 5.0 Layer of Coverage (1) (3) 140 610 100.0 Layer of Coverage (2) (3) (4) 610 1,120 99.8 Layer of Coverage 1,120 1,250 100.0 __________ (1) Approximately 4% of this layer covers California, Arizona and Nevada only.
Coverage on individual catastrophes provided for the 12 months ended June 30, 2024 under the Treaty is presented below in various layers: Catastrophe Losses and LAE In Excess of Up to Percentage of Coverage (Amounts in millions) Retained $ — $ 100 — % Layer of Coverage 100 140 5.0 Layer of Coverage (1) (3) 140 610 100.0 Layer of Coverage (2) (3) (4) 610 1,120 99.8 Layer of Coverage 1,120 1,250 100.0 __________ (1) Approximately 4% of this layer covers California, Arizona and Nevada only.
The Company believes that it compensates its agents above the industry average. Net commissions incurred in 2023 were approximately 15% of net premiums written. The Company’s advertising budget is allocated among television, radio, newspaper, internet, and direct mailing media with the intent to provide the best coverage available within targeted media markets.
The Company believes that it compensates its agents above the industry average. Net commissions incurred in 2024 were approximately 15% of net premiums written. The Company’s advertising budget is allocated among television, radio, newspaper, internet, and direct mailing media with the intent to provide the best coverage available within targeted media markets.
The ORSA is intended to be used by state insurance regulators to evaluate the risk exposure and quality of the risk management processes within insurance companies to assist in conducting risk-focused financial examinations and for determining the overall financial condition of insurance companies. The Company filed its most recent ORSA Summary Report with the California DOI in November 2023.
The ORSA is intended to be used by state insurance regulators to evaluate the risk exposure and quality of the risk management processes within insurance companies to assist in conducting risk-focused financial examinations and for determining the overall financial condition of insurance companies. The Company filed its most recent ORSA Summary Report with the California DOI in November 2024.
The Company has historically seen premium growth during hard market conditions. The Company believes that the automobile insurance market in most states was hard during 2023 as insurance carriers increased rates reflecting high inflation and loss severity and tightened their underwriting. In addition, in California, several insurance carriers stopped writing new business policies.
The Company has historically seen premium growth during hard market conditions. The Company believes that the automobile insurance market in most states was hard during 2024 as insurance carriers increased rates reflecting high inflation and loss severity and tightened their underwriting. In addition, in California, several insurance carriers stopped writing new business policies.
Excluding AIS and PoliSeek, independent agents and agencies collectively accounted for approximately 89% of the Company's direct premiums written in 2023 and no single independent agent or agency accounted for more than 1.9% of the Company’s direct premiums written during any of the last three years.
Excluding AIS and PoliSeek, independent agents and agencies collectively accounted for approximately 89% of the Company's direct premiums written in 2024 and no single independent agent or agency accounted for more than 1.9% of the Company’s direct premiums written during any of the last three years.
In California, "good drivers," as defined by the California Insurance Code, accounted for approximately 87% of the Company's California voluntary private passenger automobile policies-in-force at December 31, 2023, while higher risk categories accounted for approximately 13%.
In California, "good drivers," as defined by the California Insurance Code, accounted for approximately 87% of the Company's California voluntary private passenger automobile policies-in-force at December 31, 2024, while higher risk categories accounted for approximately 13%.
Zhang has over 20 years of experience in the data analytics and data science fields.
Zhang has over 20 years of experience in the data analytics and data science fields. 14
("PoliSeek") 2009 Insurance agency Animas Funding LLC ("AFL") 2013 Special purpose investment vehicle Fannette Funding LLC ("FFL") 2014 Special purpose investment vehicle Mercury Plus Insurance Services LLC 2018 Insurance agency Mercury Information Technology Services LLC 2023 Parent company of Mercury Shanghai Mercury (Shanghai) Information Technology Services Co., Ltd.
("PoliSeek") 2009 Insurance agency Animas Funding LLC 2013 Special purpose investment vehicle Fannette Funding LLC 2014 Special purpose investment vehicle Mercury Plus Insurance Services LLC 2018 Insurance agency Mercury Information Technology Services LLC 2023 Parent company of Mercury Shanghai Mercury (Shanghai) Information Technology Services Co., Ltd.
The moderating inflationary trend in 2023 relative to 2022 discussed above was a major contributor to the favorable reserve development in the private passenger automobile line of insurance business for 2023.
The moderated inflationary trend in 2023 relative to 2022 discussed above was a major contributor to the favorable reserve development in the private passenger automobile line of insurance business for 2023.
There were no material CIGA assessments in 2023. The CEA is a quasi-governmental organization that was established to provide a market for earthquake coverage to California homeowners. The Company places all new and renewal earthquake coverage offered with its homeowner policy directly with the CEA.
There were no CIGA assessments in 2024. The CEA is a quasi-governmental organization that was established to provide a market for earthquake coverage to California homeowners. The Company places all new and renewal earthquake coverage offered with its homeowner policy directly with the CEA.
Reinstatement premiums are based on the amount of reinsurance benefits used by the Company at 100% of the annual premium rate, with the exception of the reinstatement restrictions noted in the tables above, up to the maximum reinstatement premium of approximately $95 million and $72 million if the full amount of benefit is used for the 12 months ending June 30, 2024 and 2023, respectively.
Reinstatement premiums are based on the amount of reinsurance benefits used by the Company at 100% of the annual premium rate, with the exception of the reinstatement restrictions noted in the tables above, up to the maximum reinstatement premium of approximately $101 million and $95 million if the full amount of benefit is used for the 12 months ending June 30, 2025 and 2024, respectively.
The Company made direct financial contributions of approximately $24,000 and $83,000 to officeholders and candidates in 2023 and 2022, respectively. The Company believes in supporting the political process and intends to continue to make such contributions in amounts which it determines to be appropriate. The Insurance Companies must comply with minimum capital requirements under applicable state laws and regulations.
The Company made direct financial contributions of approximately $0 and $24,000 to officeholders and candidates in 2024 and 2023, respectively. The Company believes in supporting the political process and intends to continue to make such contributions in amounts which it determines to be appropriate. The Insurance Companies must comply with minimum capital requirements under applicable state laws and regulations.
The Company periodically monitors the RBC level of each of the Insurance Companies. As of December 31, 2023, 2022 and 2021, each of the Insurance Companies exceeded the minimum required RBC level. For more detailed information, see "Liquidity and Capital Resources—F. Regulatory Capital Requirements" in "Item 7.
The Company periodically monitors the RBC level of each of the Insurance Companies. As of December 31, 2024, 2023 and 2022, each of the Insurance Companies exceeded the minimum 11 required RBC level. For more detailed information, see "Liquidity and Capital Resources—F. Regulatory Capital Requirements" in "Item 7.
In 2023, the Company incurred approximately $9 million in net advertising expense. Underwriting The Company sets its own automobile insurance premium rates, subject to rating regulations issued by the Department of Insurance or similar governmental agency of each state in which it is licensed to operate ("DOI"). Each state has different rate approval requirements.
In 2024, the Company incurred approximately $21 million in net advertising expense. Underwriting The Company sets its own automobile insurance premium rates, subject to rating regulations issued by the Department of Insurance or similar governmental agency of each state in which it is licensed to operate ("DOI"). Each state has different rate approval requirements.
Guidelines established by the National Association of Insurance Commissioners (the "NAIC") indicate that this ratio should be no greater than 3 to 1.
Guidelines established by the National Association of Insurance Commissioners (the "NAIC") suggest that this ratio should be no greater than 3 to 1.
Average invested assets at cost are based on the monthly amortized cost of the invested assets for each period. (2) At December 31, 2023, fixed maturity securities with call features totaled $3.2 billion at fair value and $3.3 billion at amortized cost.
Average invested assets at cost are based on the monthly amortized cost of the invested assets for each period. (2) At December 31, 2024, fixed maturity securities with call features totaled $3.6 billion at fair value and $3.6 billion at amortized cost.
Year Ended December 31, 2023 2022 2021 2020 2019 Loss ratio (Company-wide) 82.3 % 85.1 % 73.8 % 67.4 % 75.2 % Expense ratio (Company-wide) 23.5 % 24.4 % 24.9 % 26.2 % 24.5 % Combined ratio (Company-wide) 105.8 % 109.5 % 98.7 % 93.6 % 99.7 % Combined ratio (Company's private passenger automobile only) 103.0 % 110.3 % 96.0 % 88.3 % 98.2 % Industry combined ratio (all writers) (1) N/A 111.7 % 100.7 % 90.5 % 98.1 % Industry combined ratio (excluding direct writers) (1) N/A 104.6 % 99.4 % 91.4 % 97.3 % ____________ (1) Source: A.M.
Year Ended December 31, 2024 2023 2022 2021 2020 Loss ratio (Company-wide) 72.6 % 82.3 % 85.1 % 73.8 % 67.4 % Expense ratio (Company-wide) 23.5 % 23.5 % 24.4 % 24.9 % 26.2 % Combined ratio (Company-wide) 96.1 % 105.8 % 109.5 % 98.7 % 93.6 % Combined ratio (Company's private passenger automobile only) 93.1 % 103.0 % 110.3 % 96.0 % 88.3 % Industry combined ratio (all writers) (1) N/A 104.6 % 111.7 % 100.7 % 90.5 % Industry combined ratio (excluding direct writers) (1) N/A 102.2 % 104.6 % 99.4 % 91.4 % ____________ (1) Source: A.M.
Walters 77 Vice President, Corporate Affairs and Secretary Simon Zhang 47 Vice President and Chief Data & Analytics Officer Mr. George Joseph, Chairman of the Board of Directors, has served in this capacity since 1961. He held the position of Chief Executive Officer of the Company for 45 years from 1961 through 2006. Mr.
Walters 78 Vice President, Corporate Affairs and Secretary Simon Zhang 48 Vice President and Chief Data & Analytics Officer Mr. George Joseph, Chairman of the Board of Directors, has served in this capacity since 1961. He held the position of Chief Executive Officer of the Company for 45 years from 1961 through 2006. Mr.
The Company's private passenger automobile renewal rate in California (the rate of acceptance of offers to renew) averaged approximately 95%, 96%, and 97% in 2023, 2022, and 2021, respectively. Claims The Company conducts the majority of claims processing without the assistance of outside adjusters. The claims staff administers all claims and manages all legal and adjustment aspects of claims processing.
The Company's private passenger automobile renewal rate in California (the rate of acceptance of offers to renew) averaged approximately 99%, 95%, and 96% in 2024, 2023, and 2022, respectively. Claims The Company conducts the majority of claims processing without the assistance of outside adjusters. The claims staff administers all claims and manages all legal and adjustment aspects of claims processing.
Based on the most recent regularly published statistical compilations of premiums written in 2022, the Company was the seventh largest writer of private passenger automobile insurance in California and the sixteenth largest in the United States. The property and casualty insurance industry is highly cyclical, with alternating hard and soft market conditions.
Based on the most recent regularly published statistical compilations of premiums written in 2023, the Company was the eighth largest writer of private passenger automobile insurance in California and the sixteenth largest in the United States. The property and casualty insurance industry is highly cyclical, with alternating hard and soft market conditions.
Catastrophe losses due to events that occurred in 2023 totaled approximately $247 million, w ith no reinsurance benefits used for these losses, resulting primarily from rainstorms and hail in Texas and Oklahoma, winter storms and rainstorms in California, and the impact of Tropical Storm Hilary in California.
Catastrophe losses due to the events that occurred in 2023 totaled approximately $247 million, with no reinsurance benefits used for these losses, resulting primarily from rainstorms and hail in Texas and Oklahoma, winter 5 storms and rainstorms in California, and the impact of Tropical Storm Hilary in California.
Best, Aggregates & Averages (2019 through 2022), for all property and casualty insurance companies (private passenger automobile line only, after policyholder dividends). Premiums to Surplus Ratio The following table presents the Insurance Companies’ statutory ratios of net premiums written to policyholders’ surplus.
Best, Aggregates & Averages (2020 through 2023), for all property and casualty insurance companies (private passenger automobile line only, after policyholder dividends). Premiums to Surplus Ratio The following table presents the Insurance Companies’ statutory ratios of net premiums written to policyholders’ surplus.
The Company's website address is not intended to function as a hyperlink and the information contained on the Company’s website is not, and should not be considered part of, and is not incorporated by reference into, this Annual Report on Form 10-K.
Available Information The Company’s website address is www.mercuryinsurance.com . The Company's website address is not intended to function as a hyperlink and the information contained on the Company’s website is not, and should not be considered part of, and is not incorporated by reference into, this Annual Report on Form 10-K.
The Company maintains branch offices in a number of locations in California; Clearwater, Florida; Kennesaw, Georgia; Lake Forest, Illinois; Las Vegas, Nevada; Bridgewater, New Jersey; Melville, New York; Independence, Ohio; Oklahoma City, Oklahoma; Austin, Texas; and Shanghai, China. Human Capital The Company had approximately 4,100 employees at December 31, 2023.
The Company maintains branch offices in a number of locations in California; Clearwater, Florida; Kennesaw, Georgia; Lake Forest, Illinois; Las Vegas, Nevada; Bridgewater, New Jersey; Melville, New York; Oklahoma City, Oklahoma; Austin, Texas; and Shanghai, China. Human Capital The Company had approximately 4,200 employees at December 31, 2024.
(2) 33% of this layer covers California, Arizona and Nevada only. (3) Layer of Coverage represents multiple actual treaty layers that are grouped for presentation purposes. (4) 6.3% of this layer covers only California wildfires and fires following an earthquake in California, and is not subject to reinstatement.
(2) Approximately 30% of this layer covers California, Arizona and Nevada only. (3) Layer of Coverage represents multiple actual treaty layers that are grouped for presentation purposes. (4) Approximately 10% of this layer covers only California wildfires and fires following an earthquake in California, and is not subject to reinstatement.
The table below presents the combined total reinsurance premiums under the Treaty (annual premiums and reinstatement premiums) for the 12 months ending June 30, 2024 and 2023, respectively: Treaty Annual Premium (1) Reinstatement Premium (2) Total Combined Premium (2) (Amounts in millions) For the 12 months ending June 30, 2024 $ 99 $ — $ 99 For the 12 months ended June 30, 2023 $ 74 $ — $ 74 __________ (1) The increase in the annual premium is primarily due to higher reinsurance coverage and rates and growth in the covered book of business.
The table below presents the combined total reinsurance premiums under the Treaty (annual premiums and reinstatement premiums) for the 12 months ending June 30, 2025 and 2024, respectively: Treaty Annual Premium (1) Reinstatement Premium (2) Total Combined Premium (2) (Amounts in millions) For the 12 months ending June 30, 2025 $ 105 $ 101 $ 206 For the 12 months ended June 30, 2024 $ 99 $ — $ 99 __________ (1) The increase in the annual premium is primarily due to higher reinsurance coverage and rates and growth in the covered book of business.
These assessments are made after CEA capital has been expended and are based upon each company’s participation percentage multiplied by the amount of the total assessment. Based upon the most recent information provided by the CEA, the Company’s maximum total exposure to CEA assessments at April 30, 2023, the most recent date at which information was available, was $85.6 million.
These assessments are made after CEA capital has been expended and are based upon each company’s participation percentage multiplied by the amount of the total assessment. Based upon the most recent information provided by the CEA, the Company’s maximum total exposure to CEA assessments at April 30, 2024, the most recent date at which information was available, was $83.8 million.
In addition, the Company experienced favorable development of approximately $5 million on prior years' catastrophe losses in 2021. Statutory Accounting Principles The Company’s results are reported in accordance with GAAP, which differ in some respects from amounts reported under SAP prescribed by insurance regulatory authorities.
In addition, the Company experienced unfavorable development of approximately $1 million on prior years' catastrophe losses in 2022. Statutory Accounting Principles The Company’s results are reported in accordance with GAAP, which differ in some respects from amounts reported under SAP prescribed by insurance regulatory authorities.
The Insurance Companies’ ratios (Company-wide) include lines of insurance business other than private passenger automobile that accounted for approximately 37.6% of direct premiums written in 2023; hence, the Company believes its combined ratio (for private passenger automobile only) is more comparable to the industry ratios.
The Insurance Companies’ ratios (Company-wide) include lines of insurance business other than private passenger automobile that accounted for approximately 38.3% of direct premiums written in 2024; hence, the Company believes its combined ratio (for private passenger automobile only) is more comparable to the industry ratios.
Petro 60 Vice President and Chief Claims Officer Mark Ribisi 61 President and Chief Executive Officer of AIS Management LLC Jeffrey M. Schroeder 47 Vice President and Chief Product Officer Heidi C. Sullivan 55 Vice President and Chief Human Capital Officer Erik Thompson 55 Vice President and Chief Marketing Officer Charles Toney 62 Vice President and Chief Actuary Judy A.
Petro 61 Vice President and Chief Claims Officer Mark Ribisi 62 President and Chief Executive Officer of AIS Management LLC Jeffrey M. Schroeder 48 Vice President and Chief Product Officer Heidi C. Sullivan 56 Vice President and Chief Human Capital Officer Erik Thompson 56 Vice President and Chief Marketing Officer Charles Toney 63 Vice President and Chief Actuary Judy A.
The Company regularly reviews its compensation practices, both in terms of its overall workforce and individual employees, to ensure its pay is fair and equitable. In addition, the Company reviews its staffing levels periodically to ensure they are aligned with its business needs.
The Company regularly reviews its compensation practices, both in terms of its overall workforce and individual employees, to ensure its pay is fair, equitable and in compliance with applicable federal and other laws and regulations. In addition, the Company reviews its staffing levels periodically to ensure they are aligned with its business needs.
Year Ended December 31, 2023 2022 2021 2020 2019 (Amounts in thousands, except ratios) Net premiums written $ 4,464,199 $ 3,978,017 $ 3,855,369 $ 3,611,543 $ 3,731,723 Policyholders’ surplus $ 1,667,187 $ 1,502,424 $ 1,827,210 $ 1,768,103 $ 1,539,998 Ratio 2.7 to 1 2.7 to 1 2.1 to 1 2.0 to 1 2.4 to 1 Investments The Company’s investments are directed by the Chief Investment Officer under the supervision of the Investment Committee of the Board of Directors.
Year Ended December 31, 2024 2023 2022 2021 2020 (Amounts in thousands, except ratios) Net premiums written $ 5,378,310 $ 4,464,199 $ 3,978,017 $ 3,855,369 $ 3,611,543 Policyholders’ surplus $ 2,030,460 $ 1,667,187 $ 1,502,424 $ 1,827,210 $ 1,768,103 Ratio 2.7 to 1 2.7 to 1 2.7 to 1 2.1 to 1 2.0 to 1 Investments The Company’s investments are directed by the Chief Investment Officer under the supervision of the Investment Committee of the Board of Directors.
For the 12 months ending June 30, 2024 and 2023, the Treaty provides $1,111 million and $936 million of coverage, respectively, on a per occurrence basis after covered catastrophe losses exceed the Company retention limit of $100 million and $60 million, respectively.
For the 12 months ending June 30, 2025 and 2024, the Treaty provides $1,290 million and $1,111 million of coverage, respectively, on a per occurrence basis after covered catastrophe losses exceed the Company retention limit of $150 million and $100 million, respectively.
The Company's employees are critical to its continued success, and it focuses significant attention on attracting and retaining talented and motivated individuals. The Company pays its employees fairly and competitively and offers a wide range of benefits regardless of gender, race, religion, or ethnicity.
The Company's employees are critical to its continued success, and it focuses significant attention on attracting and retaining talented and motivated individuals. The Company pays its employees fairly and competitively and offers a wide range of benefits.
Butler, Vice President and Chief Underwriting Officer, joined the Company as a Casualty Claims Adjuster in 2004 and worked in various capacities including as Director of Personal Property Underwriting. Ms. Butler was appointed Vice President and Chief Underwriting Officer in January 2022. Ms. Gibbs, Vice President and Chief Experience Officer, joined the Company in 2022.
Butler, Vice President and Chief Underwriting Officer, joined the Company as a Casualty Claims Adjuster in 2004 and worked in various capacities including as Director of Personal Property Underwriting. Ms. Butler was appointed Vice President and Chief Underwriting Officer in January 2022. Mr. Colby, Vice President and Chief Sales Officer, joined the Company in 2025.
Financial Statements and Supplementary Data." Investment Results The following table presents the investment results of the Company for the most recent five years: Year Ended December 31, 2023 2022 2021 2020 2019 (Dollars in thousands) Average invested assets at cost (1) (2) $ 5,096,428 $ 4,902,755 $ 4,681,462 $ 4,291,888 $ 4,008,601 Net investment income (3) Before income taxes $ 234,630 $ 168,356 $ 129,727 $ 134,858 $ 141,263 After income taxes $ 200,209 $ 146,204 $ 115,216 $ 120,043 $ 125,637 Average annual yield on investments (3) Before income taxes 4.6 % 3.4 % 2.8 % 3.1 % 3.5 % After income taxes 3.9 % 3.0 % 2.5 % 2.8 % 3.1 % Net realized investment gains (losses) after income taxes $ 79,801 $ (385,583) $ 88,210 $ 67,727 $ 176,006 __________ (1) Fixed maturities and short-term bonds at amortized cost; equities and other short-term investments at cost.
Financial Statements and Supplementary Data." Investment Results The following table presents the investment results of the Company for the most recent five years: Year Ended December 31, 2024 2023 2022 2021 2020 (Dollars in thousands) Average invested assets at cost (1) (2) $ 5,683,973 $ 5,096,428 $ 4,902,755 $ 4,681,462 $ 4,291,888 Net investment income (3)(4) Before income taxes $ 279,989 $ 234,630 $ 168,356 $ 129,727 $ 134,858 After income taxes $ 235,419 $ 200,209 $ 146,204 $ 115,216 $ 120,043 Average annual yield on investments (3)(4) Before income taxes 4.5 % 4.3 % 3.4 % 2.8 % 3.1 % After income taxes 3.8 % 3.7 % 3.0 % 2.5 % 2.8 % Net realized investment gains (losses) after income taxes $ 70,050 $ 79,801 $ (385,583) $ 88,210 $ 67,727 __________ (1) Fixed maturities and short-term bonds at amortized cost; equities and other short-term investments at cost.
As of December 31, 2023, the Insurance Companies are permitted to pay in 2024, without obtaining DOI approval for extraordinary dividends, $163 million in dividends to Mercury General, of which $140 million may be paid by the California Companies.
As of December 31, 2024, the Insurance Companies are permitted to pay in 2025, without obtaining DOI 12 approval for extraordinary dividends, $252 million in dividends to Mercury General, of which $228 million may be paid by the California Companies.
Information about the Company's Executive Officers The following table presents certain information concerning the executive officers of the Company as of February 8, 2024: Name Age Position George Joseph 102 Chairman of the Board Gabriel Tirador 59 Chief Executive Officer Victor G. Joseph 37 President and Chief Operating Officer Theodore R.
Information about the Company's Executive Officers The following table presents certain information concerning the executive officers of the Company as of February 6, 2025: Name Age Position George Joseph 103 Chairman of the Board Gabriel Tirador 60 Chief Executive Officer Victor G. Joseph 38 President and Chief Operating Officer Theodore R.
However, the Company is required to discount loss reserves for federal income tax purposes. 4 The following table provides a reconciliation of beginning and ending estimated reserve balances for the years indicated: RECONCILIATION OF NET LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES Year Ended December 31, 2023 2022 2021 (Amounts in thousands) Gross reserves at January 1 (1) $ 2,584,910 $ 2,226,430 $ 1,991,304 Reinsurance recoverables on unpaid losses (25,323) (41,379) (54,461) Net reserves at January 1 (1) 2,559,587 2,185,051 1,936,843 Incurred losses and loss adjustment expenses related to: Current year 3,553,801 3,314,938 2,786,246 Prior years (35,948) 47,281 (26,091) Total incurred losses and loss adjustment expenses 3,517,853 3,362,219 2,760,155 Loss and loss adjustment expense payments related to: Current year 2,080,690 1,862,006 1,601,998 Prior years 1,243,196 1,125,677 909,949 Total payments 3,323,886 2,987,683 2,511,947 Net reserves at December 31 (1) 2,753,554 2,559,587 2,185,051 Reinsurance recoverables on unpaid losses 32,148 25,323 41,379 Gross reserves at December 31 (1) $ 2,785,702 $ 2,584,910 $ 2,226,430 _____________ (1) Under statutory accounting principles ("SAP"), reserves are stated net of reinsurance recoverables on unpaid losses whereas under U.S. generally accepted accounting principles ("GAAP"), reserves are stated gross of reinsurance recoverables on unpaid losses.
However, the Company is required to discount loss reserves for federal income tax purposes. 4 The following table provides a reconciliation of beginning and ending estimated reserve balances for the years indicated: RECONCILIATION OF NET LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES Year Ended December 31, 2024 2023 2022 (Amounts in thousands) Gross reserves at January 1 (1) $ 2,785,702 $ 2,584,910 $ 2,226,430 Reinsurance recoverables on unpaid losses (32,148) (25,323) (41,379) Net reserves at January 1 (1) 2,753,554 2,559,587 2,185,051 Incurred losses and loss adjustment expenses related to: Current year 3,659,724 3,553,801 3,314,938 Prior years 24,787 (35,948) 47,281 Total incurred losses and loss adjustment expenses 3,684,511 3,517,853 3,362,219 Loss and loss adjustment expense payments related to: Current year 1,963,076 2,080,690 1,862,006 Prior years 1,351,603 1,243,196 1,125,677 Total payments 3,314,679 3,323,886 2,987,683 Net reserves at December 31 (1) 3,123,386 2,753,554 2,559,587 Reinsurance recoverables on unpaid losses 28,645 32,148 25,323 Gross reserves at December 31 (1) $ 3,152,031 $ 2,785,702 $ 2,584,910 _____________ (1) Under statutory accounting principles ("SAP"), reserves are stated net of reinsurance recoverables on unpaid losses whereas under U.S. generally accepted accounting principles ("GAAP"), reserves are stated gross of reinsurance recoverables on unpaid losses.
Average annual yield on investments before and after income taxes for 2023 increased compared to 2022, 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.
Average annual yield on investments before and after income taxes for 2024 increased compared to 2023, primarily due to the maturity and replacement of lower yielding investments purchased when market interest rates were lower with higher yielding investments.
Certain of these independent agencies are under the common ownership of a parent company; however, they each operate autonomously with their own contractual agreements with the Company and hence are accounted for as separate independent agencies.
The independent agents and agencies are independent contractors selected and contracted by the Company and generally also represent competing insurance companies. Certain of these independent agencies are under the common ownership of a parent company; however, they each operate autonomously with their own contractual agreements with the Company and hence are accounted for as separate independent agencies.
Petro, Vice President and Chief Claims Officer, has been employed by the Company in the Claims Department since 1987. Mr. Petro was appointed Vice President in March 2014, and named Chief Claims Officer in March 2015. Mr.
Prior to 2017, he held various leadership positions at eBay and IBM. Mr. Petro, Vice President and Chief Claims Officer, has been employed by the Company in the Claims Department since 1987. Mr. Petro was appointed Vice President in March 2014, and named Chief Claims Officer in March 2015. Mr.
The Company had no capital loss carryforward at December 31, 2023. 7 Investment Portfolio The following table presents the composition of the Company’s total investment portfolio: December 31, 2023 2022 2021 Cost (1) Fair Value Cost (1) Fair Value Cost (1) Fair Value (Amounts in thousands) Taxable bonds $ 2,102,740 $ 2,031,594 $ 1,758,853 $ 1,649,078 $ 1,640,945 $ 1,632,358 Tax-exempt state and municipal bonds 2,292,243 2,287,742 2,467,937 2,439,233 2,268,835 2,399,165 Total fixed maturities 4,394,983 4,319,336 4,226,790 4,088,311 3,909,780 4,031,523 Equity securities 654,939 730,693 668,843 699,552 754,536 970,939 Short-term investments 179,375 178,491 123,928 122,937 141,206 140,127 Total investments $ 5,229,297 $ 5,228,520 $ 5,019,561 $ 4,910,800 $ 4,805,522 $ 5,142,589 __________ (1) Fixed maturities and short-term bonds at amortized cost; equities and other short-term investments at cost.
The Company had no capital loss carryforward at December 31, 2024. 7 Investment Portfolio The following table presents the composition of the Company’s total investment portfolio: December 31, 2024 2023 2022 Cost (1) Fair Value Cost (1) Fair Value Cost (1) Fair Value (Amounts in thousands) Taxable bonds $ 2,759,532 $ 2,704,046 $ 2,102,740 $ 2,031,594 $ 1,758,853 $ 1,649,078 Tax-exempt state and municipal bonds 2,222,926 2,209,332 2,292,243 2,287,742 2,467,937 2,439,233 Total fixed maturities 4,982,458 4,913,378 4,394,983 4,319,336 4,226,790 4,088,311 Equity securities 795,068 879,175 654,939 730,693 668,843 699,552 Short-term investments 283,792 283,817 179,375 178,491 123,928 122,937 Total investments $ 6,061,318 $ 6,076,370 $ 5,229,297 $ 5,228,520 $ 5,019,561 $ 4,910,800 __________ (1) Fixed maturities and short-term bonds at amortized cost; equities and other short-term investments at cost.
The inflationary pressures and the supply chain and labor shortage issues discussed above were major contributors to the adverse reserve development in the automobile line of insurance business for 2022.
The inflationary pressures and the supply chain and labor shortage issues discussed above were major contributors to the adverse reserve development in the automobile line of insurance business for 2022. The Company recorded catastrophe losses net of reinsurance of approximately $277 million, $239 million, and $102 million in 2024, 2023, and 2022, respectively.
Pang, Vice President and Chief Technology Officer, joined the Company in 2023. Prior to joining the Company, he served as Chief Technology Officer for Appen from 2018 to 2023 and Chief Data Officer for Ctrip from 2017 to 2018. Prior to 2017, he held various leadership positions at eBay and IBM. Mr.
Graves was appointed Chief Investment Officer in 1998, and named Vice President in 2001. Mr. Pang, Vice President and Chief Technology Officer, joined the Company in 2023. Prior to joining the Company, he served as Chief Technology Officer for Appen from 2018 to 2023 and Chief Data Officer for Ctrip from 2017 to 2018.
(3) Net investment income before and after income taxes for 2023 increased compared to 2022, primarily due to higher average yield combined with higher average invested assets.
No interest income was earned on cash in 2021 and 2020. (4) Net investment income before and after income taxes for 2024 increased compared to 2023, primarily due to higher average yield combined with higher average invested assets and cash.
The Company benchmarks and sets pay ranges based on market data and considering such factors as employees' roles, experiences and performance, and the location of their job. Individual goals are set annually for each employee, and attainment of those goals is an element of the employee’s performance assessment.
The Company benchmarks and sets pay ranges based on market data and considers additional factors in compliance with applicable federal and other laws and regulations. Individual goals are set annually for each employee, and attainment of those goals is an element of the employee’s performance assessment.
The catastrophe events that occurred in 2023 caused approximately $247 million in losses to the Company, resulting primarily from rainstorms and hail in Texas and Oklahoma, winter storms and rainstorms in California, and the impact of Tropical Storm Hilary in California.
The catastrophe events that occurred in 2024 caused approximately $268 million in losses to the Company, resulting primarily 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.
(4) The majority of the Company’s umbrella policies have coverage limits of $1,000,000. The commercial umbrella liability is 100% reinsured. The principal executive offices of Mercury General are located in Los Angeles, California. The home office of the Insurance Companies and the information technology center are located in Brea, California.
The principal executive offices of Mercury General are located in Los Angeles, California. The home office of the Insurance Companies and the information technology center are located in Brea, California.
There was no assessment made in 2023. The Insurance Companies in other states are also subject to the provisions of similar insurance guaranty associations. There were no material assessments or payments during 2023 in other states.
There were no assessments made in 2024. The Insurance Companies in other states are also subject to the provisions of similar insurance guaranty associations. There were no material assessments during 2024 in other states that cannot be recouped through a premium tax credit or a surcharge to policyholders.
Some of the Company’s competitors are larger and well-capitalized national companies that sell directly to consumers or have broad distribution networks of employed or captive agents. 8 Reputation for customer service and price are the principal means by which the Company competes with other insurers. In addition, the marketing efforts of independent agents can provide a competitive advantage.
Reputation for customer service and price are the principal means by which the Company competes with other insurers. In addition, the marketing efforts of independent agents can provide a competitive advantage.
The decrease in the provision for insured events of prior years in 2021 of approximately $26.1 million primarily resulted from lower than estimated losses and loss adjustment expenses in the homeowners and private passenger automobile lines of insurance business.
The increase in the provision for insured events of prior years in 2024 of approximately $24.8 million primarily resulted from 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.
The Company offers the following types of automobile coverage: collision, property damage, bodily injury ("BI"), comprehensive, personal injury protection ("PIP"), underinsured and uninsured motorist, and other hazards. 1 The Company offers the following types of homeowners coverage: dwelling, liability, personal property, and other coverages.
(2) No individual line of insurance business accounted for more than 5% of total direct premiums written. The Company offers the following types of automobile coverage: collision, property damage, bodily injury ("BI"), 1 comprehensive, personal injury protection ("PIP"), underinsured and uninsured motorist, and other hazards.
The Company recognizes that its success is based on the talents and dedication of those it employs, and it is highly invested in their success. The Company is committed to hiring, developing and supporting a diverse and inclusive workplace.
The Company recognizes that its success is based on the talents and dedication of those it employs, and it is highly invested in their success. The Company is committed to drawing from the largest pools of talent to help find the best people for the Company.
Stalick 60 Senior Vice President and Chief Financial Officer Kelly Butler 41 Vice President and Chief Underwriting Officer Katie Gibbs 34 Vice President and Chief Experience Officer Christopher Graves 58 Vice President and Chief Investment Officer Brandt N. Minnich 57 Vice President and Chief Sales Development Officer Wilson Pang 47 Vice President and Chief Technology Officer Randall R.
Stalick 61 Senior Vice President and Chief Financial Officer Kelly Butler 42 Vice President and Chief Underwriting Officer Nick Colby 40 Vice President and Chief Sales Officer Katie Gibbs 35 Vice President and Chief Experience Officer Christopher Graves 59 Vice President and Chief Investment Officer Wilson Pang 48 Vice President and Chief Technology Officer Randall R.
(2) The reinstatement premium and the total combined premium for the treaty period ending June 30, 2024 are projected amounts to be paid based on the assumption that there will be no reinstatements occurring during this treaty period. The reinstatement premium for the treaty period ended June 30, 2023 is zero, as there were no actual reinstatement premiums paid.
(2) The reinstatement premium and the total combined premium for the treaty period ending June 30, 2025 are projected amounts to be paid based on the latest information available and an indication that there will be full reinstatements of all layers of coverage occurring during this treaty period.
Competitive Conditions The Company operates in the highly competitive property and casualty insurance industry subject to competition on pricing, claims handling, consumer recognition, coverage offered and product features, customer service, and geographic coverage.
Competitive Conditions The Company operates in the highly competitive property and casualty insurance industry subject to competition on pricing, claims handling, consumer recognition, coverage offered and product features, customer service, and geographic 8 coverage. Some of the Company’s competitors are larger and well-capitalized national companies that sell directly to consumers or have broad distribution networks of employed or captive agents.
No reinsurance benefits were available under the Treaty for these losses as none of the 2022 catastrophe events individually resulted in losses in excess 10 of the Company’s per-occurrence retention limit of $60 million and $40 million under the Treaty for the 12 months ending June 30, 2023 and 2022, respectively.
No reinsurance benefits were available under the Treaty for these losses as none of the 2024 catastrophe events individually resulted in losses in excess of the Company’s per-occurrence retention limit of $150 million and $100 million under the Treaty for the 12 months ending June 30, 2025 and 2024, respectively. 10 The catastrophe events that occurred in 2023 caused approximately $258 million in losses to the Company as of December 31, 2024, resulting primarily from the rainstorms and hail in Texas and Oklahoma, winter storms and rainstorms in California, and the impact of Tropical Storm Hilary in California.
The Treaty ending June 30, 2024 and 2023 each provides for one full reinstatement of coverage limits.
The reinstatement premium for the treaty period ended June 30, 2024 is zero, as there were no actual reinstatement premiums paid. The Treaty ending June 30, 2025 and 2024 each provides for one full reinstatement of coverage limits.
The Company recognized $15.0 million and $10.0 million in earned premiums and $9.6 million and $8.4 million in incurred losses under the Contract for the 12 months ended December 31, 2023 and 2022, respectively. The Company is the ceding party to a Catastrophe Reinsurance Treaty ("Treaty") covering a wide range of perils that is effective through June 30, 2024.
The Company recognized $15.0 million and $15.0 million in earned premiums and $1.5 million and $9.6 million in incurred losses under the Contract for the 12 months ended December 31, 2024 and 2023, respectively.
In addition, the Company experienced unfavorable development of approximately $1 million on prior years' catastrophe losses in 2022. 5 Catastrophe losses due to the events that occurred in 2021 totaled approximately $109 million, with no reinsurance benefits used for these losses, resulting primarily from the deep freeze of Winter Storm Uri and other extreme weather events in Texas and Oklahoma, rainstorms, wildfires and winter storms in California, and the impact of Hurricane Ida in New Jersey and New York.
Catastrophe losses due to events that occurred in 2024 totaled approximately $268 million, with no reinsurance benefits used for these losses, resulting primarily 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.
(2) The Company has a per-risk reinsurance treaty covering losses of $10 million in excess of $5 million, and facultative reinsurance coverage for losses above $15 million. (3) The majority of the Company’s homeowners policies have liability coverage limits of $300,000 or less, a replacement value of $500,000 or less, and a total insured value of $1,000,000 or less.
(3) The majority of the Company’s homeowners policies have liability coverage limits of $300,000 or less, a replacement value of $500,000 or less, and a total insured value of $1,000,000 or less. (4) The majority of the Company’s umbrella policies have coverage limits of $1,000,000. The commercial umbrella liability is 100% reinsured.
("Mercury Shanghai") 2024 Software development and related technical services to other subsidiaries _____________ (1) The term "California Companies" refers to MCC, MIC, CAIC, CGU, and OIC. 3 Production and Servicing of Business The Company sells its policies through a network of approximately 6,390 independent agents, its 100% owned insurance agencies, AIS and PoliSeek, and directly through internet sales portals.
Production and Servicing of Business The Company sells its policies through a network of approximately 6,340 independent agents, its 100% owned insurance agencies, AIS and PoliSeek, and directly through internet sales portals. Approximately 1,700, 1,050, and 1,040 of the independent agents are located in California, Florida, and Texas, respectively.
(4) Approximately 10% of this layer covers only California wildfires and fires following an earthquake in California, and is not subject to reinstatement. 9 Coverage on individual catastrophes provided for the 12 months ended June 30, 2023 under the Treaty is presented below in various layers: Catastrophe Losses and LAE In Excess of Up to Percentage of Coverage (Amounts in millions) Retained $ — $ 60 — % Layer of Coverage 60 100 19.5 Layer of Coverage 100 200 98.8 Layer of Coverage (1) 200 530 98.6 Layer of Coverage (2) (3) (4) 530 930 100.0 Layer of Coverage 930 1,035 98.9 __________ (1) 5% of this layer covers California, Arizona and Nevada only.
Coverage on individual catastrophes provided for the 12 months ending June 30, 2025 under the Treaty is presented below in various layers: Catastrophe Losses and LAE In Excess of Up to Percentage of Coverage (Amounts in millions) Retained $ — $ 150 — % Layer of Coverage (1) 150 650 100.0 Layer of Coverage (1) (2) (3) (4) 650 1,300 100.0 Layer of Coverage 1,300 1,440 100.0 __________ (1) Layer of Coverage represents multiple actual treaty layers that are grouped for presentation purposes.
The vast majority of the Company's employees currently work from home 2 as a result of the "Mercury's My Workplace" policy that allows most of its employees to work from anywhere in the U.S.. Available Information The Company’s website address is www.mercuryinsurance.com .
The vast majority of the Company's employees currently work from home as a result of the "Mercury's My Workplace" policy that allows most of its employees to work from anywhere in the United States of America. In addition, Mercury's technology subsidiary, Mercury Shanghai, has approximately 50 employees working at a leased office space in Shanghai, China.
Removed
(2) No individual line of insurance business accounted for more than 5% of total direct premiums written.
Added
The Company offers the following types of homeowners coverage: dwelling, liability, personal property, and other coverages.
Removed
The Company also owns an office building in Folsom, California, which is used to support California operations, and another in Oklahoma City, Oklahoma, which supports the Company's operations outside of California and houses several third party tenants.
Added
(2) The Company has a per-risk reinsurance treaty covering losses of $10 million in excess of $5 million, and facultative reinsurance coverage for losses above $15 million subject to some coverage limitations for certain commercial property policies with multiple structures.
Removed
Approximately 1,630, 1,030, and 1,110 of the independent agents are located in California, Florida, and Texas, respectively. The independent agents and agencies are independent contractors selected and contracted by the Company and generally also represent competing insurance companies.
Added
("Mercury Shanghai") 2024 Software development and related technical services to other subsidiaries Upper Animas Holdings LLC 2024 Special purpose investment vehicle _____________ 3 (1) The term "California Companies" refers to MCC, MIC, CAIC, CGU, and OIC.
Removed
The severe inflationary trend continued into 2023, but began moderating as the year progressed.
Added
The severe inflationary trend continued into 2023, but moderated as the year progressed. During 2024, the inflation rate continued to be moderate for automobile parts and labor but it was at an elevated level for bodily injury costs.
Removed
The Company recorded catastrophe losses net of reinsurance of approximately $239 million, $102 million, and $104 million in 2023, 2022, and 2021, respectively.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

20 edited+2 added−2 removed190 unchanged
Biggest changeAlthough the inflation moderated in 2023, it has created a heightened level of risk for the Company, the insurance industry and the U.S. economy generally throughout 2022 and much of 2023.
Biggest changeHigh inflation levels could have adverse consequences for the Company, the insurance industry and the U.S. economy generally. The U.S. economy experienced elevated levels of inflation in 2022. Although the inflation moderated in 2023 and 2024, 26 it has created a heightened level of risk for the Company, the insurance industry and the U.S. economy generally.
The Company’s ability to undertake these efforts successfully, and as a result, price accurately, is subject to a number of risks and uncertainties, including but not limited to: • availability of sufficient reliable data; • incorrect or incomplete analysis of available data; • uncertainties inherent in estimates and assumptions, generally; • selection and application of appropriate rating formulae or other pricing methodologies; • successful innovation of new pricing strategies; • recognition of changes in trends and in the projected severity and frequency of losses; 15 • the Company’s ability to forecast renewals of existing policies accurately; • unanticipated court decisions, legislation or regulatory action; • ongoing changes in the Company’s claim settlement practices; • changes in operating expenses; • changing driving patterns; • extra-contractual liability arising from bad faith claims; • catastrophes, including those which may be related to climate change; • unexpected medical inflation; and • unanticipated inflation in automobile repair costs, automobile parts prices, and used car prices.
The Company’s ability to undertake these efforts successfully, and as a result, price accurately, is subject to a number of risks and uncertainties, including but not limited to: • availability of sufficient reliable data; • incorrect or incomplete analysis of available data; • uncertainties inherent in estimates and assumptions, generally; 15 • selection and application of appropriate rating formulae or other pricing methodologies; • successful innovation of new pricing strategies; • recognition of changes in trends and in the projected severity and frequency of losses; • the Company’s ability to forecast renewals of existing policies accurately; • unanticipated court decisions, legislation or regulatory action; • ongoing changes in the Company’s claim settlement practices; • changes in operating expenses; • changing driving patterns; • extra-contractual liability arising from bad faith claims; • catastrophes, including those which may be related to climate change; • unexpected medical inflation; and • unanticipated inflation in automobile repair costs, automobile parts prices, and used car prices.
Laws or regulations that significantly curtail or regulate the use of credit scoring, if enacted in a large number of states in which the Company operates, could negatively impact the Company’s future results of operations. 16 If the Company cannot maintain its A.M.
Laws or regulations that significantly curtail or regulate the use of credit scoring, if enacted in a large number of states in which the Company operates, 16 could negatively impact the Company’s future results of operations. If the Company cannot maintain its A.M.
In addition, the assumptions used to make this determination are subject to change from period to period based on changes in tax laws or variances between the Company’s projected operating performance and actual results. As a result, significant management judgment is required in assessing the possible need for a 19 deferred tax asset valuation allowance.
In addition, the assumptions used to make this determination are 19 subject to change from period to period based on changes in tax laws or variances between the Company’s projected operating performance and actual results. As a result, significant management judgment is required in assessing the possible need for a deferred tax asset valuation allowance.
It is possible that future changes the Company is required to adopt 25 could change the current accounting treatment that the Company applies to its consolidated financial statements and that such changes could have a material adverse effect on the Company’s financial condition and results of operations.
It is possible that future changes the Company is required to adopt could change the current accounting treatment that the Company applies to its consolidated financial statements and that such 25 changes could have a material adverse effect on the Company’s financial condition and results of operations.
Adverse developments in the market for personal automobile insurance or the personal automobile insurance industry in general, whether related to changes in competition, pricing or regulations, 20 could cause the Company’s results of operations to suffer.
Adverse developments in the market for personal automobile insurance or the personal automobile insurance industry in general, whether related to changes in competition, pricing or regulations, could cause the Company’s results of operations to suffer.
In addition, other risks 14 and uncertainties not presently known or that the Company currently believes to be immaterial may also adversely affect the Company’s business.
In addition, other risks and uncertainties not presently known or that the Company currently believes to be immaterial may also adversely affect the Company’s business.
At December 31, 2023, the Company’s consolidated balance sheets reflected approximately $43 million of goodwill and $8 million of other intangible assets. The Company evaluates whether events or circumstances have occurred that suggest that the fair values of its goodwill and other intangible assets are below their respective carrying values.
At December 31, 2024, the Company’s consolidated balance sheets reflected approximately $43 million of goodwill and $8 million of other intangible assets. The Company evaluates whether events or circumstances have occurred that suggest that the fair values of its goodwill and other intangible assets are below their respective carrying values.
Although the Company attempts to manage its exposure to such events, the occurrence of one or more major catastrophes in any given period could have a material and adverse impact on the Company’s financial condition and results of operations and could result in substantial outflows of cash as losses are paid.
Although the Company attempts to manage its exposure to such events, the occurrence of one or more major catastrophes in any given period could have a material and adverse impact on the Company’s financial condition and results of operations and could result in substantial outflows of cash as losses are paid. See Note 20.
The Company may be adversely affected by changes in the private passenger automobile insurance industry. Approximately 62% of the Company’s direct premiums written for the year ended December 31, 2023 were generated from private passenger automobile insurance policies.
The Company may be adversely affected by changes in the private passenger automobile insurance industry. Approximately 62% of the Company’s direct premiums written for the year ended December 31, 2024 were generated 20 from private passenger automobile insurance policies.
The Company’s ability to obtain financing also depends on economic conditions affecting financial markets and financial strength and claims-paying ability ratings, which are assigned based upon an evaluation of the Company’s ability to meet its financial obligations. The Company’s current financial strength rating with Fitch and Moody's is A- and A2, respectively.
The Company’s ability to obtain financing also depends on economic conditions affecting financial markets and financial strength and claims-paying ability ratings, which are assigned based upon an evaluation of the Company’s ability to meet its financial obligations. The Company’s current financial strength rating with Fitch and Moody's is A- with Negative outlook and A3 with Negative outlook, respectively.
Risks Related to the Company’s Business The Company remains highly dependent upon California to produce revenues and operating profits. For the year ended December 31, 2023, the Company generated approximately 80% of its direct automobile insurance premiums written in California.
Risks Related to the Company’s Business The Company remains highly dependent upon California to produce revenues and operating profits. For the year ended December 31, 2024, the Company generated approximately 83% of its direct automobile insurance premiums written in California.
Best ratings, it may not be able to maintain premium volume in its insurance operations sufficient to attain the Company’s financial performance goals. The Company’s ability to retain its existing business or to attract new business in its Insurance Companies is affected by its rating by A.M. Best. A.M.
Best ratings, it may not be able to maintain premium volume in its insurance operations sufficient to attain the Company’s financial performance goals. The Company’s ability to retain its existing business or to attract new business in its Insurance Companies is affected by its rating by A.M. Best. A.M. Best currently rates all of the Insurance Companies as A (Excellent).
At December 31, 2023, approximately 44% of the Company’s total investment portfolio at fair value and approximately 53% of its total fixed maturity securities at fair value were invested in tax-exempt municipal bonds.
At December 31, 2024, approximately 36% of the Company’s total investment portfolio at fair value and approximately 45% of its total fixed maturity securities at fair value were invested in tax-exempt municipal bonds.
In March 2020, the outbreak of COVID-19 was recognized as a pandemic by the World Health Organization and shortly thereafter, the President of the United States declared a National Emergency.
In March 2020, the outbreak of COVID-19 was recognized as a pandemic by the World Health Organization and shortly thereafter, the President of the United States declared a National Emergency. The COVID-19 pandemic has caused significant economic and financial turmoil both in the United States and globally.
Some competitors offer a larger variety of products, lower prices for insurance coverage, higher commissions, or more attractive non-cash incentives. To maintain its relationship with these independent agents, the Company must pay competitive commissions, be able to respond to their needs quickly and adequately, and create a consistently high level of customer satisfaction.
To maintain its relationship with these independent agents, the Company must pay competitive commissions, be able to respond to their needs quickly and adequately, and create a consistently high level of customer satisfaction.
The Company believes that if it is unable to maintain its A.M. Best ratings within the A ratings range, it may face greater challenges to grow its premium volume sufficiently to attain its financial performance goals, which may adversely affect the Company’s business, financial condition, and results of operations.
Best ratings within the A ratings range, it may face greater challenges to grow its premium volume sufficiently to attain its financial performance goals, which may adversely affect the Company’s business, financial condition, and results of operations. The Company may require additional capital in the future, which may not be available or may only be available on unfavorable terms.
Assets and liabilities recorded on the consolidated balance sheets at fair value are categorized based on the level of judgment associated with the inputs used to measure their fair value and the level of market price observability. 17 During periods of market disruption, including periods of significantly changing interest rates, rapidly widening credit spreads, inactivity or illiquidity, it may be difficult to value certain of the Company’s securities if trading becomes less frequent and/or market data become less observable.
During periods of market disruption, including periods of significantly changing interest rates, rapidly widening credit spreads, inactivity or illiquidity, it may be difficult to value certain of the Company’s securities if trading becomes less frequent and/or market data become less observable.
The Company depends on independent agents who may discontinue sales of its policies at any time. The Company sells its insurance policies primarily through a network of approximately 6,390 independent agents. The Company must compete with other insurance carriers for these agents’ business.
The Company sells its insurance policies primarily through a network of approximately 6,340 independent agents. The Company must compete with other insurance carriers for these agents’ business. Some competitors offer a larger variety of products, lower prices for insurance coverage, higher commissions, or more attractive non-cash incentives.
Best currently rates all of the Insurance Companies with sufficient operating history as A (Excellent). On February 17, 2023, A.M. Best affirmed the Financial Strength Rating ("FSR") of A (Excellent) with Stable outlook for the Company's A rated entities and upgraded the FSR from A- (Excellent) to A (Excellent) with Stable outlook for the Company's A- rated entities.
On February 15, 2024, A.M. Best affirmed the Financial Strength Rating ("FSR") of A (Excellent) with Stable outlook for the Company's Insurance Companies. The Company believes that if it is unable to maintain its A.M.
Removed
The Company may require additional capital in the future, which may not be available or may only be available on unfavorable terms.
Added
Assets and liabilities recorded on the consolidated balance sheets at fair value are categorized based on the level of judgment associated with the inputs used to measure their fair 17 value and the level of market price observability.
Removed
The COVID-19 pandemic has caused significant economic and financial turmoil both in the United States and globally. 26 High inflation levels could have adverse consequences for the Company, the insurance industry and the U.S. economy generally. The U.S. economy experienced elevated levels of inflation in 2022.
Added
Subsequent Event in Notes to Consolidated Financial Statements under Part II-Item 8. Financial Statements and Supplemental Data for discussion of significant catastrophe losses related to Southern California wildfires that occurred in January 2025. The Company depends on independent agents who may discontinue sales of its policies at any time.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

4 edited+0 added−0 removed26 unchanged
Biggest changeStalick is a Certified Public Accountant and has a Bachelors Degree in Business Administration, Accounting and Finance concentration, and an MBA, Business Analytics concentration. • Wilson Pang, Vice President and Chief Technology Officer : The Company’s CTO regularly provides the 28 Board with updates on cybersecurity risk management or significant reported cybersecurity incidents.
Biggest changeStalick is a Certified Public Accountant and has a Bachelors Degree in Business Administration, Accounting and Finance concentration, and an MBA, Business Analytics concentration. • Wilson Pang, Vice President and Chief Technology Officer : The Company’s CTO regularly provides the Board with updates on cybersecurity risk management or significant reported cybersecurity incidents.
The Information Security business unit regularly evaluates the Company's cybersecurity risk profile and reports to the Board of Directors (the “Board”). In the event that a significant cybersecurity incident is identified, the Company engages a third-party cybersecurity incident response consultant, as needed, to provide an independent evaluation of the incident. 27 B.
The Information Security business unit regularly evaluates the Company's cybersecurity risk profile and reports to the Board of Directors (the “Board”). In the event that a significant cybersecurity incident is identified, the Company engages a third-party cybersecurity incident response consultant, as needed, to provide an independent evaluation of the incident. B.
Oversight of Cybersecurity Risks Associated with Third Party Service Providers The Company oversees and identifies material risks from cybersecurity threats related to its use of third-party service providers in accordance with its Vendor Risk Management Process. The contracts with service providers are reviewed during the onboarding process, renewal periods, and as necessary.
Oversight of Cybersecurity Risks Associated with Third Party Service Providers The Company oversees and identifies material risks from cybersecurity threats related to its use of third-party service providers in accordance with its Vendor Risk Management Process. The contracts with service providers are reviewed during 27 the onboarding process, renewal periods, and as necessary.
The Company’s CTO works with the Company’s CEO, COO and Head of Information Security to determine the severity of cybersecurity incidents. The Company’s CTO also works with its Head of Information Security to direct action in the event of a severe cybersecurity incident. Mr. Pang has over 20 years’ experience in the technology industry.
The Company’s CTO works with the Company’s CEO, COO and Head of Information Security to determine the severity of cybersecurity incidents. The Company’s CTO also works with its Head of Information Security to direct action in the event of a severe cybersecurity incident. Mr. Pang has over 20 years’ experience in the 28 technology industry.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAlthough the Company occupies space in owned buildings and leased office space, and all team members may utilize this office space to carry out Company business, most of its workforce chooses to work from home, as a result of the "Mercury's My Workplace" policy that allows most of its employees to work from anywhere in the U.S. beginning January 2022.
Biggest changeMost of its workforce works from home as a result of the "Mercury's My Workplace" policy that allows most of its employees to work from anywhere in the U.S.
Item 2. Properties The Company owns the following buildings which support all business segments. Space not occupied by the Company may be leased to independent third party tenants.
Item 2. Properties The Company owns the following buildings which support all business segments. Space not used by the Company may be leased to independent third party tenants.
In addition, the Company owns 5.9 acres of land in Rancho Cucamonga, California. The Company’s properties are well maintained, adequately meet its needs, and are being utilized for their intended purposes. Office location is not crucial to the Company’s operations.
In addition, the Company owns 5.9 acres of land in Rancho Cucamonga, California, which was classified as a property held for sale as of December 31, 2024. The Company’s properties are well maintained, adequately meet its needs, and are being utilized for their intended purposes. Office location is not crucial to the Company’s operations.
Location Purpose Size in Square Feet Percent Occupied by the Company at December 31, 2023 Brea, CA Property held for sale 156,000 100 % Brea, CA Home office and I.T. facilities 80,000 100 % Folsom, CA Administrative 88,000 100 % Los Angeles, CA Executive offices 41,000 95 % Oklahoma City, OK Administrative 100,000 10 % The Company leases additional office space for operations.
Location Purpose Size in Square Feet Percent Leased to Third Parties at December 31, 2024 Brea, CA Home office and I.T. facilities 80,000 — % Folsom, CA Property held for sale 88,000 — % Los Angeles, CA Executive offices 41,000 5 % The Company leases additional office space for operations.
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Consequently, the Company is in the process of reducing its office footprint. 29

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFor loss contingencies believed to be reasonably possible, the Company also discloses the nature of the loss contingency and an estimate of the possible loss, range of loss, or a statement that such an estimate cannot be made. In addition, the Company accrues for anticipated legal defense costs associated with such lawsuits and regulatory actions.
Biggest changeFor loss contingencies believed to be reasonably possible, the Company also discloses the nature of the loss contingency and an 29 estimate of the possible loss, range of loss, or a statement that such an estimate cannot be made. In addition, the Company accrues for anticipated legal defense costs associated with such lawsuits and regulatory actions.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe graph assumes that $100 was invested on December 31, 2018 in each of the Company’s Common Stock, the S&P 500 Index and the industry peer group and the reinvestment of all dividends. 2018 2019 2020 2021 2022 2023 Mercury General $ 100.00 $ 98.76 $ 112.28 $ 119.22 $ 80.33 $ 91.20 Industry Peer Group 100.00 118.21 121.92 151.59 167.70 189.22 S&P 500 Index 100.00 131.49 155.68 200.37 164.08 207.21 The industry peer group consists of Alleghany Corporation, Allstate Corporation, American Financial Group, Arch Capital Group Ltd, Berkley (W.R.), Berkshire Hathaway 'B', Chubb Corporation, Cincinnati Financial Corporation, CNA Financial Corporation, Erie Indemnity Company, Hanover Insurance Group, Markel Corporation, Old Republic International, Progressive Corporation, RLI Corporation, Selective Insurance Group, and Travelers Companies, Inc.
Biggest changeThe graph assumes an investment of $100 on December 31, 2019 in each of the Company’s Common Stock, the S&P 500 Index and the industry peer group and the reinvestment of all dividends. 2019 2020 2021 2022 2023 2024 Mercury General $ 100.00 $ 113.69 $ 120.71 $ 81.33 $ 92.34 $ 168.31 Custom Peer Group 100.00 103.14 128.24 141.87 160.07 208.01 S&P 500 Property & Casualty Insurance Index 100.00 106.96 127.58 151.65 168.05 227.67 S&P 500 Index 100.00 118.40 152.39 124.79 157.59 197.02 The custom peer group consists of Alleghany Corporation, Allstate Corporation, American Financial Group, Arch Capital Group Ltd, Berkley (W.R.), Berkshire Hathaway 'B', Chubb Corporation, Cincinnati Financial Corporation, CNA Financial Corporation, Erie Indemnity Company, Hanover Insurance Group, Markel Corporation, Old Republic International, Progressive Corporation, RLI Corporation, Selective Insurance Group, and Travelers Companies, Inc.
Recent Sales of Unregistered Securities None. Share Repurchases The Company does not currently have any share repurchases authorized by the Board. The Company has not repurchased any of its Common Stock since 2000.
Recent Sales of Unregistered Securities None. 32 Share Repurchases The Company does not currently have any share repurchases authorized by the Board. The Company has not repurchased any of its Common Stock since 2000.
Financial Statements and Supplementary Data." 31 Performance Graph The following graph compares the cumulative total shareholder returns on the Company’s common stock (trading symbol: MCY) with the cumulative total returns on the Standard and Poor’s 500 Composite Stock Price Index ("S&P 500 Index") and the Company’s industry peer group over the last five years.
Financial Statements and Supplementary Data." 31 Performance Graph The following graph compares the cumulative total shareholder returns on the Company’s common stock (trading symbol: MCY) with the cumulative total returns on the Standard and Poor’s 500 Composite Stock Price Index ("S&P 500 Index") and the Company’s industry peer group (Custom Peer Group and S&P 500 Property & Casualty Insurance Index) over the last five years.
Holders As of February 8, 2024, there were approximately 141 holders of record of the Company’s common stock. Dividends For financial statement purposes, the Company records dividends on the declaration date. The continued payment and amount of cash dividends will depend upon the Company’s operating results, overall financial condition, capital requirements, and general business conditions.
Holders As of February 6, 2025, there were approximately 137 holders of record of the Company’s common stock. Dividends For financial statement purposes, the Company records dividends on the declaration date. The continued payment and amount of cash dividends will depend upon the Company’s operating results, overall financial condition, capital requirements, and general business conditions.
As of December 31, 2023, the Insurance Companies are permitted to pay in 2024, without obtaining DOI approval for extraordinary dividends, $163 million in dividends to Mercury General, of which $140 million may be paid by the California Companies.
As of December 31, 2024, the Insurance Companies are permitted to pay in 2025, without obtaining DOI approval for extraordinary dividends, $252 million in dividends to Mercury General, of which $228 million may be paid by the California Companies.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information The shares of the Company's common stock are listed and traded on the New York Stock Exchange (trading symbol: MCY). The closing price of the Company’s common stock on February 8, 2024 was $40.01.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information The shares of the Company's common stock are listed and traded on the New York Stock Exchange (trading symbol: MCY). The closing price of the Company’s common stock on February 6, 2025 was $51.06.
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In past years, the Company used the Custom Peer Group as its industry peer group for purposes of the stock performance graph below.
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However, based on the broad use of the S&P 500 Property & Casualty Insurance Index as an industry peer group among our peers in the insurance industry, as well as the Company's growth as a property and casualty insurance carrier in recent years, the Company determined that the S&P 500 Property & Casualty Insurance Index would be a more appropriate industry peer group to include in the stock performance graph.
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Accordingly, while both the Custom Peer Group and the S&P 500 Property & Casualty Insurance Index have been included for this transitional year, the Company does not expect to include the Custom Peer Group in future years.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe Company believes that it is reasonably possible that the California automobile BI severity could vary from recorded amounts by as much as 12%, 8% and 6% for 2023, 2022 and 2021 accident years, respectively; however, the variation could be more or less than these amounts. 37 During the years 2019 through 2023, the changes in the loss severity amounts for the three preceding accident years from the prior year amounts (BI severity variance from prior year) have ranged as follows: High Low Immediate preceding accident year 7.9% (2.9)% Second preceding accident year 5.4% (1.0)% Third preceding accident year 3.6% (2.6)% The following table presents the effects on the California automobile BI loss reserves for the 2023, 2022 and 2021 accident years based on possible variations in the severity recorded; however, the actual variations could be more or less than these amounts: California Automobile Bodily Injury Inflation Reserve Sensitivity Analysis Accident Year Number of Claims Expected Actual Recorded Severity at 12/31/2023 Implied Inflation Rate Recorded (1) (A) Pro-forma severity if actual severity is lower by 12% for 2023, 8% for 2022, and 6% for 2021 (B) Pro-forma severity if actual severity is higher by 12% for 2023, 8% for 2022, and 6% for 2021 Favorable loss development if actual severity is less than recorded (Column A) Unfavorable loss development if actual severity is more than recorded (Column B) 2023 20,642 $ 28,070 7.3 % (2) $ 24,702 $ 31,438 $ 69,522,000 $ (69,522,000) 2022 20,969 $ 26,154 12.3 % $ 24,062 $ 28,246 $ 43,867,000 $ (43,867,000) 2021 20,522 $ 23,284 12.8 % $ 21,887 $ 24,681 $ 28,669,000 $ (28,669,000) 2020 18,591 $ 20,645 — — — — — Total Loss Development—Favorable (Unfavorable) $ 142,058,000 $ (142,058,000) ___________ (1) Implied inflation rate is calculated by dividing the difference between the current and prior year actual recorded severity by the prior year actual recorded severity.
Biggest changeDuring the years 2020 through 2024, the changes in the loss severity amounts for the three preceding accident years from the prior year amounts (BI severity variance from prior year) have ranged as follows: High Low Immediate preceding accident year 7.9% (2.4)% Second preceding accident year 5.4% (1.0)% Third preceding accident year 3.6% (2.6)% The following table presents the effects on the California automobile BI loss reserves for the 2024, 2023 and 2022 accident years based on possible variations in the severity recorded; however, the actual variations could be more or less than these amounts: California Automobile Bodily Injury Inflation Reserve Sensitivity Analysis Accident Year Number of Claims Expected Actual Recorded Severity at 12/31/2024 Implied Inflation Rate Recorded (1) (A) Pro-forma severity if actual severity is lower by 12% for 2024, 8% for 2023, and 6% for 2022 (B) Pro-forma severity if actual severity is higher by 12% for 2024, 8% for 2023, and 6% for 2022 Favorable loss development if actual severity is less than recorded (Column A) Unfavorable loss development if actual severity is more than recorded (Column B) 2024 21,241 $ 33,648 13.4 % $ 29,610 $ 37,686 $ 85,771,000 $ (85,771,000) 2023 21,257 $ 29,663 14.3 % $ 27,290 $ 32,036 $ 50,443,000 $ (50,443,000) 2022 21,306 $ 25,949 13.7 % $ 24,392 $ 27,506 $ 33,173,000 $ (33,173,000) 2021 20,598 $ 22,816 — — — — — Total Loss Development—Favorable (Unfavorable) $ 169,387,000 $ (169,387,000) ___________ (1) Implied inflation rate is calculated by dividing the difference between the current and prior year actual recorded severity by the prior year actual recorded severity.
Many potential factors can affect the BI inflation rate, including changes in claims handling process, changes in statutes and regulations, the number of litigated files, increased use of medical procedures such as MRIs and epidural injections, general economic factors, timeliness of claims adjudication, vehicle safety, weather patterns, changes in the relative percentages of single- and multi-car accidents, social inflation, and gasoline prices, among other factors; however, the magnitude of the impact of such factors on the inflation rate is unknown.
Many potential factors can affect the BI inflation rate, including changes in claims handling process, changes in statutes and regulations, the number of litigated files, increased use of medical procedures such as 38 MRIs and epidural injections, general economic factors, timeliness of claims adjudication, vehicle safety, weather patterns, changes in the relative percentages of single- and multi-car accidents, social inflation, and gasoline prices, among other factors; however, the magnitude of the impact of such factors on the inflation rate is unknown.
In addition, time can be a critical part of reserving determinations since the longer the span between the incidence of a loss and the payment or settlement of a claim, the more variable the 35 ultimate settlement amount could be. Accordingly, short-tail liability claims, such as property damage claims, tend to be more reasonably predictable than long-tail liability claims.
In addition, time can be a critical part of reserving determinations since the longer the span between the incidence of a loss and the payment or settlement of a claim, the more variable the ultimate settlement amount could be. Accordingly, short-tail liability claims, such as property damage claims, tend to be more reasonably predictable than long-tail liability claims.
For material loss contingencies believed to be reasonably possible, the Company also discloses the nature of the loss contingency and an estimate of the possible loss, range of loss, or a statement that such an estimate cannot be made. In addition, the Company accrues for anticipated legal defense costs associated with such lawsuits and regulatory actions.
For material loss contingencies believed to be reasonably possible, the Company also discloses the nature of the loss contingency and an estimate of the possible loss, range of loss, or a statement that such an estimate cannot be made. In addition, 36 the Company accrues for anticipated legal defense costs associated with such lawsuits and regulatory actions.
The 2023 loss ratio was negatively impacted by a total of approximately $247 million of catastrophe losses, excluding favorable development of approximately $8 million on prior years' catastrophe losses, primarily due to rainstorms and hail in Texas and Oklahoma, winter storms and rainstorms in California, and the impact of Tropical Storm Hilary in California.
The 2023 loss ratio was negatively impacted by a total of approximately $247 million 41 of catastrophe losses, excluding favorable development of approximately $8 million on prior years' catastrophe losses, primarily due to the rainstorms and hail in Texas and Oklahoma, winter storms and rainstorms in California, and the impact of Tropical Storm Hilary in California.
Short-term investments include money market accounts, options, and short-term bonds that are highly rated short duration securities and redeemable within one year. A primary exposure for the fixed maturity securities is interest rate risk. The longer the duration, the more sensitive the 44 asset is to market interest rate fluctuations.
Short-term investments include money market accounts, options, and short-term bonds that are highly rated short duration securities and redeemable within one year. A primary exposure for the fixed maturity securities is interest rate risk. The longer the duration, the more sensitive the asset is to market interest rate fluctuations.
The ORSA is required to cover, among many items, a company’s risk management policies, the 50 material risks to which the company is exposed, how the company measures, monitors, manages and mitigates material risks, and how much economic and regulatory capital is needed to continue to operate in a strong and healthy manner.
The ORSA is required to cover, among many items, a company’s risk management policies, the material risks to which the company is exposed, how the company measures, monitors, manages and mitigates material risks, and how much economic and regulatory capital is needed to continue to operate in a strong and healthy manner.
As assets with longer maturity dates tend to produce higher current yields, the Company’s historical investment philosophy has resulted in a portfolio with a moderate duration. The Company's portfolio is heavily weighted in investment grade tax-exempt municipal bonds.
As assets with longer maturity dates tend to produce higher current yields, the 45 Company’s historical investment philosophy has resulted in a portfolio with a moderate duration. The Company's portfolio is heavily weighted in investment grade tax-exempt municipal bonds.
The notes are unsecured senior obligations of the Company, with a 4.4% annual coupon payable on March 15 and September 15 of each year commencing September 15, 2017. These notes mature on March 15, 2027.
The notes are unsecured senior obligations of the Company, with a 4.4% annual coupon payable on March 15 and September 15 of each 49 year commencing September 15, 2017. These notes mature on March 15, 2027.
The Company was in compliance with all of its financial covenants pertaining to minimum statutory surplus, debt to total capital ratio, and RBC ratio under the unsecured credit facility at December 31, 2023. For a further discussion, see Note 8. Notes Payable, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data." E.
The Company was in compliance with all of its financial covenants pertaining to minimum statutory surplus, debt to total capital ratio, and RBC ratio under the unsecured credit facility at December 31, 2024. For a further discussion, see Note 8. Notes Payable, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data." E.
The ORSA is intended to be used by state insurance regulators to evaluate the risk exposure and quality of the risk management processes within insurance companies to assist in conducting risk-focused financial examinations and for determining the overall financial condition of insurance companies. The Company filed its most recent ORSA Summary Report with the California DOI in November 2023.
The ORSA is intended to be used by state insurance regulators to evaluate the risk exposure and quality of the risk management processes within insurance companies to assist in conducting risk-focused financial examinations and for determining the overall financial condition of insurance companies. The Company filed its most recent ORSA Summary Report with the California DOI in November 2024.
Debt The Company's debt consists of the following: December 31, Lender Interest Rate Expiration 2023 2022 (Amounts in thousands) Senior unsecured notes (1) Publicly traded 4.40% March 15, 2027 $ 375,000 $ 375,000 Unsecured credit facility (2) Bank of America, Wells Fargo Bank, BMO Bank, and U.S.
Debt The Company's debt consists of the following: December 31, Lender Interest Rate Expiration 2024 2023 (Amounts in thousands) Senior unsecured notes (1) Publicly traded 4.40% March 15, 2027 $ 375,000 $ 375,000 Unsecured credit facility (2) Bank of America, Wells Fargo Bank, BMO Bank, and U.S.
Leases, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" for additional information on lease obligations. (3) Loss and loss adjustment expense reserves represents an estimate of amounts necessary to settle all outstanding claims, including IBNR as of December 31, 2023.
Leases, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" for additional information on lease obligations. (3) Loss and loss adjustment expense reserves represents an estimate of amounts necessary to settle all outstanding claims, including IBNR as of December 31, 2024.
Debt" below for cash flow related to outstanding debt. 43 C. Invested Assets Portfolio Composition An important component of the Company’s financial results is the return on its investment portfolio. The Company’s investment strategy emphasizes safety of principal and consistent income generation, within a total return framework.
Debt" below for cash flow related to outstanding debt. 44 C. Invested Assets Portfolio Composition An important component of the Company’s financial results is the return on its investment portfolio. The Company’s investment strategy emphasizes safety of principal and consistent income generation, within a total return framework.
The private passenger automobile line of insurance business of MIC and CAIC represented approximately 48% and 5%, respectively, of the Company's total net premiums earned in 2023. • In March 2023, the California DOI approved a 12.6% rate increase on the California homeowners line of insurance business. This rate increase became effective in May 2023.
The private passenger automobile line of insurance business of MIC and CAIC represented approximately 48% and 6%, respectively, of the Company's total net premiums earned in 2024. • In March 2023, the California DOI approved a 12.6% rate increase on the California homeowners line of insurance business. This rate increase became effective in May 2023.
IBNR includes estimates, based upon past experience, of ultimate developed costs, which may differ from case estimates, unreported claims that occurred on or prior to December 31, 2023 and 2022, and estimated future payments for reopened claims.
IBNR includes estimates, based upon past experience, of ultimate developed costs, which may differ from case estimates, unreported claims that occurred on or prior to December 31, 2024 and 2023, and estimated future payments for reopened claims.
The underlying ratings for insured municipal bonds have been factored into the average rating of the securities by the rating agencies with no significant disparity between the absolute bond ratings and the underlying credit ratings as of December 31, 2023 and 2022.
The underlying ratings for insured municipal bonds have been factored into the average rating of the securities by the rating agencies with no significant disparity between the absolute bond ratings and the underlying credit ratings as of December 31, 2024 and 2023.
Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Company's Form 10-K for the year ended December 31, 2022 for a discussion of changes in its results of operations from the year ended December 31, 2021 to the year ended December 31, 2022. LIQUIDITY AND CAPITAL RESOURCES A.
Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Company's Form 10-K for the year ended December 31, 2023 for a discussion of changes in its results of operations from the year ended December 31, 2022 to the year ended December 31, 2023. LIQUIDITY AND CAPITAL RESOURCES A.
The Company believes that the automobile insurance market in most states was hard during 2023 as insurance carriers increased rates reflecting high inflation and loss severity and tightened their underwriting.
The Company believes that the automobile insurance market in most states was hard during 2024 as insurance carriers increased rates reflecting high inflation and loss severity and tightened their underwriting.
The Company utilized the cash provided by operating activities during the year ended December 31, 2023 primarily for the net purchases of investment securities and payment of dividends to its shareholders.
The Company utilized the cash provided by operating activities during the year ended December 31, 2024 primarily for the net purchases of investment securities and payment of dividends to its shareholders.
The Company periodically monitors the RBC level of each of the Insurance Companies. As of December 31, 2023, 2022 and 2021, each of the Insurance Companies exceeded the minimum required RBC level, as determined by the NAIC and adopted by the state insurance regulators.
The Company periodically monitors the RBC level of each of the Insurance Companies. As of December 31, 2024, 2023 and 2022, each of the Insurance Companies exceeded the minimum required RBC level, as determined by the NAIC and adopted by the state insurance regulators.
Amounts differ from the balances presented on the consolidated balance sheets as of December 31, 2023 because the debt amounts above include interest and exclude the discount and issuance costs of the debt.
Amounts differ from the balances presented on the consolidated balance sheets as of December 31, 2024 because the debt amounts above include interest and exclude the discount and issuance costs of the debt.
The average annual net cash provided by operating activities for the past 10 years was approximately $389 million, and cash generated from operations was sufficient to meet the liquidity requirements over this period. The following table presents the estimated fair value of fixed maturity securities at December 31, 2023 by contractual maturity in the next five years.
The average annual net cash provided by operating activities for the past 10 years was approximately $468 million, and cash generated from operations was sufficient to meet the liquidity requirements over this period. The following table presents the estimated fair value of fixed maturity securities at December 31, 2024 by contractual maturity in the next five years.
At December 31, 2023 and 2022, the average rating of the Company’s insured municipal securities was A+, which corresponded to the average rating of the investment grade bond insurers.
At December 31, 2024 and 2023, the average rating of the Company’s insured municipal securities was A+, which corresponded to the average rating of the investment grade bond insurers.
None of the Insurance Companies’ RBC ratios were less than 350% of the authorized control level RBC as of December 31, 2023, none less than 330% as of December 31, 2022, and none less than 400% as of December 31, 2021. Generally, an RBC ratio of 200% or less would require some form of regulatory or company action.
None of the Insurance Companies’ RBC ratios were less than 350% of the authorized control level RBC as of December 31, 2024, none less than 350% as of December 31, 2023, and none less than 330% as of December 31, 2022. Generally, an RBC ratio of 200% or less would require some form of regulatory or company action.
As of December 31, 2023, Mercury General had approximately $43 million in investments and cash that could be utilized to satisfy its direct holding company obligations. The principal sources of funds for the Insurance Companies are premiums, sales and maturity of invested assets, and dividend and interest income from invested assets.
As of December 31, 2024, Mercury General had approximately $49 million in investments and cash that could be utilized to satisfy its direct holding company obligations. The principal sources of funds for the Insurance Companies are premiums, sales and maturity of invested assets, and dividend and interest income from invested assets.
The following are recent rate increases approved by the California DOI or pending its approval for lines of insurance business that accounted for 5% or more of the Company's total net premiums earned in 2023: • In January 2023, the California DOI approved a 6.9% rate increase on the private passenger automobile line of insurance business for MIC and CAIC.
The following are recent rate increases approved by the California DOI for lines of insurance business that accounted for 5% or more of the Company's total net premiums earned in 2024: • In January 2023, the California DOI approved a 6.9% rate increase on the private passenger automobile line of insurance business for MIC and CAIC.
As a larger proportion of claims from an accident year are settled, there emerges a higher degree of certainty for the loss reserves established for that accident year. At December 31, 2023, the accident years that are most likely to develop are the 2021 through 2023 accident years; however, it is possible that older accident years could develop as well.
As a larger proportion of claims from an accident year are settled, there emerges a higher degree of certainty for the loss reserves established for that accident year. At December 31, 2024, the accident years that are most likely to develop are the 2022 through 2024 accident years; however, it is possible that older accident years could develop as well.
General The Company is largely dependent upon dividends received from its insurance subsidiaries in the current and prior years to pay debt service costs and to make distributions to its shareholders. Under current insurance law, the Insurance Companies are entitled to pay ordinary dividends of approximately $163 million in 2024 to Mercury General.
General The Company is largely dependent upon dividends received from its insurance subsidiaries in the current and prior years to pay debt service costs and to make distributions to its shareholders. Under current insurance law, the Insurance Companies are entitled to pay ordinary dividends of approximately $252 million in 2025 to Mercury General.
The Company expects to meet these contractual obligations primarily with a combination of cash expected to be generated from future operations and cash and short-term investments on hand, except for the payment of the principal of the debt, which is expected to be made with a future borrowing. F.
Financial Statements and Supplementary Data." The Company expects to meet these contractual obligations primarily with a combination of cash expected to be generated from future operations and cash and short-term investments on hand, except for the payment of the principal of the debt, which is expected to be made with a future borrowing. F.
The remaining 29.7% and 34.5% of insured municipal securities at December 31, 2023 and 2022, respectively, were insured by non-rated or below investment grade bond insurers that the Company believes did not provide credit enhancement. The modified duration of the municipal securities portfolio reflecting anticipated early calls was 3.0 years and 3.6 years at December 31, 2023 and 2022, respectively.
The remaining 27.3% and 29.7% of insured municipal securities at December 31, 2024 and 2023, respectively, were insured by non-rated or below investment grade bond insurers that the Company believes did not provide credit enhancement. The modified duration of the municipal securities portfolio reflecting anticipated early calls was 3.6 years and 3.0 years at December 31, 2024 and 2023, respectively.
The following table presents the maturities and durations of the Company's fixed maturity securities and short-term investments: December 31, 2023 December 31, 2022 (in years) Fixed Maturity Securities Nominal average maturity: excluding short-term investments 11.4 12.4 including short-term investments 11.0 12.0 Call-adjusted average maturities: excluding short-term investments 3.8 4.9 including short-term investments 3.6 4.8 Modified duration reflecting anticipated early calls: excluding short-term investments 3.1 3.6 including short-term investments 3.0 3.5 Short-Term Investments — — Another exposure related to the fixed maturity securities is credit risk, which is managed by maintaining a weighted-average portfolio credit quality rating of A+, at fair value at December 31, 2023, consistent with the average rating at December 31, 2022.
The following table presents the maturities and durations of the Company's fixed maturity securities and short-term investments: December 31, 2024 December 31, 2023 (in years) Fixed Maturity Securities Nominal average maturity: excluding short-term investments 11.7 11.4 including short-term investments 11.1 11.0 Call-adjusted average maturities: excluding short-term investments 4.2 3.8 including short-term investments 4.0 3.6 Modified duration reflecting anticipated early calls: excluding short-term investments 3.6 3.1 including short-term investments 3.4 3.0 Short-Term Investments — — Another exposure related to the fixed maturity securities is credit risk, which is managed by maintaining a weighted-average portfolio credit quality rating of A+, at fair value at December 31, 2024, consistent with the average rating at December 31, 2023.
The Company’s common stock allocation is intended to enhance the return of and provide diversification for the total portfolio. At December 31, 2023, 14.0% of the total investment portfolio, at fair value, was held in equity securities, compared to 14.2% at December 31, 2022.
The Company’s common stock allocation is intended to enhance the return of and provide diversification for the total portfolio. At December 31, 2024, 14.5% of the total investment portfolio, at fair value, was held in equity securities, compared to 14.0% at December 31, 2023.
With combined cash and short-term investments of $729.4 million at December 31, 2023 as well as $50 million of undrawn credit in its unsecured credit facility, the Company believes its cash flow from operations is adequate to satisfy its liquidity requirements without the forced sale of investments. Investment maturities are also available to meet the Company’s liquidity needs.
With combined cash and short-term investments of $1,004.1 million at December 31, 2024 as well as $50 million of undrawn credit in its unsecured credit facility, the Company believes its cash flow from operations is adequate to satisfy its liquidity requirements without the forced sale of investments. Investment maturities are also available to meet the Company’s liquidity needs.
(2) The Company is obligated under various non-cancellable lease agreements providing for office space, automobiles, office equipment, and electronic data processing equipment that expire at various dates through the year 2028. Lease obligations include $3.4 million in lease commitments that have not yet commenced as of December 31, 2023. See Note 7.
(2) The Company is obligated under various non-cancellable lease agreements providing for office space, automobiles, office equipment, and electronic data processing equipment that expire at various dates through the year 2030. Lease obligations include $4.0 million in lease commitments that have not yet commenced as of December 31, 2024. See Note 7.
The Company believes that while actual development in recent years has ranged approximately from 3% to 7%, it is reasonable to expect that the range of the development could be as great as between 0% and 10%.
The Company believes that while actual development in recent years has ranged approximately from 3% to 12%, it is reasonable to expect that the range of the development could be as great as between 0% and 15%.
The Company’s loss ratio was affected by favorable development of approximately $36 million and unfavorable development of approximately $47 million on prior accident years’ loss and loss adjustment expense reserves for the years ended December 31, 2023 and 2022, respectively.
The Company’s loss ratio was affected by unfavorable development of approximately $25 million and favorable development of approximately $36 million on prior accident years’ loss and loss adjustment expense reserves for the years ended December 31, 2024 and 2023, respectively.
If the estimated ultimate claim cost requires an increase for previously reported accident years, unfavorable development occurs and an increase in losses and loss adjustment expenses is reported in the current period. For 2023, the Company reported favorable development of approximately $36 million on the 2022 and prior accident years’ loss and loss adjustment expense reserves.
If the estimated ultimate claim cost requires an increase for previously reported accident years, unfavorable development occurs and an increase in losses and loss adjustment expenses is reported in the current period. For 2024, the Company reported unfavorable development of approximately $25 million on the 2023 and prior accident years’ loss and loss adjustment expense reserves.
Equity holdings consist of non-redeemable preferred stocks, dividend-bearing common stocks on which dividend income is partially tax-sheltered by the 50% corporate dividend received deduction, and private equity funds. At December 31, 2023, 92.2% of short-term investments consisted of highly rated short-duration securities redeemable on a daily or weekly basis.
Equity holdings consist of non-redeemable preferred stocks, dividend-bearing common stocks on which dividend income is partially tax-sheltered by the 50% corporate dividend received deduction, and private equity funds. At December 31, 2024, 99.4% of short-term investments consisted of highly rated short-duration securities redeemable on a daily or weekly basis.
On February 9, 2024, the Board of Directors declared a $0.3175 quarterly dividend per share payable on March 27, 2024 to shareholders of record on March 13, 2024, with an expected payout of approximately $18 million.
On February 7, 2025, the Board of Directors declared a $0.3175 quarterly dividend per share payable on March 27, 2025 to shareholders of record on March 13, 2025, with an expected payout of approximately $18 million.
The Company’s operating results and growth have allowed it to consistently generate positive cash flow from operations, which was approximately $453 million and $353 million in 2023 and 2022, respectively. Cash flow from operations has been used to pay shareholder dividends and help support growth.
The Company’s operating results and growth have allowed it to consistently generate positive cash flow from operations, which was approximately $1,037 million and $453 million in 2024 and 2023, respectively. Cash flow from operations has been used to pay shareholder dividends and help support growth.
Equity Securities Equity holdings of $730.7 million and $699.6 million, at fair value, as of December 31, 2023 and 2022, respectively, consisted of non-redeemable preferred stocks, common stocks on which dividend income is partially tax-sheltered by the 50% corporate dividend received deduction, and private equity funds.
Equity Securities Equity holdings of $879.2 million and $730.7 million, at fair value, as of December 31, 2024 and 2023, respectively, consisted of non-redeemable preferred stocks, common stocks on which dividend income is partially tax-sheltered by the 50% corporate dividend received deduction, and private equity funds.
The favorable development in 2023 was primarily attributable to lower than estimated losses and loss adjustment expenses in the private passenger automobile and homeowners lines of insurance business, partially offset by unfavorable reserve development in the commercial property line of insurance business.
The 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.
The decrease in the loss ratio was primarily due to an increase in net premiums earned resulting from rate increases in the California automobile and homeowners lines of insurance business and in certain lines of insurance business in states outside of California, partially offset by increases in loss severity in the automobile and homeowners lines of insurance business.
The decrease in the loss ratio was primarily due to an increase in net premiums earned resulting from rate increases in the California automobile and homeowners lines of insurance business, partially offset by increases in loss severity and frequency in the California automobile line of insurance business.
At December 31, 2023 and 2022, respectively, 70.3% and 65.5% of the insured municipal securities, at fair value, most of which were investment grade, were insured by bond insurers that provide credit enhancement in addition to the ratings reflected by the financial strength of the underlying issuers.
At December 31, 2024 and 2023, respectively, 72.7% and 70.3% of the insured municipal securities, at fair value, most of which were investment grade, were insured by bond insurers that provide credit enhancement in addition to the ratings reflected by the financial strength of the underlying issuers.
The unamortized debt issuance cost of approximately $0.8 million associated with the $250 million unsecured revolving credit facility maturing on November 16, 2026 is included in other assets in the Company's consolidated balance sheets and amortized to interest expense over the term of the credit facility.
The unamortized debt issuance cost of approximately $0.6 million associated with the $250 million unsecured revolving credit facility maturing on November 18, 2027 is included in other assets in the Company's consolidated balance sheets and amortized to interest expense over the term of the credit facility.
Mortgage-Backed Securities At December 31, 2023 and 2022, respectively, the mortgage-backed securities portfolio of $186.9 million and $166.3 million, or 4.3% and 4.1% of the Company's fixed maturity securities portfolio, at fair value, was categorized as loans to "prime" residential and commercial real estate borrowers.
Mortgage-Backed Securities At December 31, 2024 and 2023, respectively, the mortgage-backed securities portfolio of $259.4 million and $186.9 million, or 5.3% and 4.3% of the Company's fixed maturity securities portfolio, at fair value, was categorized as loans to "prime" residential and commercial real estate borrowers.
The Company had holdings of $33.0 million and $27.3 million, at fair value, in commercial mortgage-backed securities at December 31, 2023 and 2022, respectively. The weighted-average rating of the entire mortgage backed securities portfolio was AA+ and AA at December 31, 2023 and 2022, respectively.
The Company had holdings of $16.0 million and $33.0 million, at fair value, in commercial mortgage-backed securities at December 31, 2024 and 2023, respectively. The weighted-average rating of the entire mortgage backed securities portfolio was AA+ at December 31, 2024 and 2023.
Based on the combined surplus of all the Insurance Companies of $1.67 billion at December 31, 2023 and net premiums written in 2023 of $4.5 billion, the ratio of premiums written to surplus was 2.68 to 1. Insurance companies are required to file an Own Risk and Solvency Assessment ("ORSA") with the insurance regulators in their domiciliary states.
Based on the combined surplus of all the Insurance Companies of $2.03 billion at December 31, 2024 and net premiums written in 2024 of $5.4 billion, the ratio of premiums written to surplus was 2.65 to 1. 51 Insurance companies are required to file an Own Risk and Solvency Assessment ("ORSA") with the insurance regulators in their domiciliary states.
Uses of Capital Dividends Cash returned to shareholders through dividends in 2023, 2022 and 2021 totaled approximately $70.3 million, $105.5 million and $140.2 million, respectively.
Uses of Capital Dividends Cash returned to shareholders through dividends in 2024, 2023 and 2022 totaled approximately $70.3 million, $70.3 million and $105.5 million, respectively.
In addition, in January 2024, the California DOI approved a 22.5% rate increase for MIC and a 3.8% rate increase for CAIC on the private passenger automobile line of insurance business. These rate increases are expected to become effective in late February of 2024.
In addition, in January 2024, the California DOI approved a 22.5% rate increase for MIC and a 3.8% rate increase for CAIC on the private passenger automobile line of insurance business. These rate increases became effective in February 2024.
The following table presents the Insurance Companies’ loss, expense, and combined ratios determined in accordance with GAAP: Year Ended December 31, 2023 2022 Loss ratio 82.3 % 85.1 % Expense ratio 23.1 % 23.6 % Combined ratio 105.4 % 108.7 % Loss ratio is calculated by dividing losses and loss adjustment expenses by net premiums earned.
The following table presents the Insurance Companies’ loss, expense, and combined ratios determined in accordance with GAAP: Year Ended December 31, 2024 2023 Loss ratio 72.6 % 82.3 % Expense ratio 23.4 % 23.1 % Combined ratio 96.0 % 105.4 % Loss ratio is calculated by dividing losses and loss adjustment expenses by net premiums earned.
It is not all-inclusive and is meant to be read in conjunction with the entirety of management’s discussion and analysis, the Company’s consolidated financial statements and notes thereto, and all other items contained within this Annual Report on Form 10-K. 2023 Financial Performance Summary The Company’s net income (loss) for the year ended December 31, 2023 was $96.3 million, or $1.74 per diluted share, 33 compared to $(512.7) million, or $(9.26) per diluted share, for the same period in 2022.
It is not all-inclusive and is meant to be read in conjunction with the entirety of management’s discussion and analysis, the Company’s consolidated financial statements and notes thereto, and all other items contained within this Annual Report on Form 10-K. 2024 Financial Performance Summary The Company’s net income for the year ended December 31, 2024 was $468.0 million, or $8.45 per diluted share, 34 compared to $96.3 million, or $1.74 per diluted share, for the same period in 2023.
Discussion of Losses and Loss Reserves and Prior Period Loss Development At December 31, 2023 and 2022, the Company recorded its point estimate of approximately $2.79 billion and $2.58 billion ($2.75 billion and $2.56 billion, net of reinsurance), respectively, in loss and loss adjustment expense reserves, which included approximately $1.61 billion and $1.45 billion ($1.61 billion and $1.45 billion, net of reinsurance), respectively, of incurred-but-not-reported liabilities ("IBNR").
Discussion of Losses and Loss Reserves and Prior Period Loss Development At December 31, 2024 and 2023, the Company recorded its point estimate of approximately $3.15 billion and $2.79 billion ($3.12 billion and $2.75 billion, net of reinsurance), respectively, in loss and loss adjustment expense reserves, which included approximately $1.92 billion and $1.61 billion ($1.92 billion and $1.61 billion, net of reinsurance), respectively, of incurred-but-not-reported liabilities ("IBNR").
The Company also offers homeowners, commercial automobile, commercial property, mechanical protection, fire, and umbrella insurance. Private passenger automobile lines of insurance business accounted for approximately 62% of the $4.6 billion of the Company’s direct premiums written in 2023, and approximately 82% of the private passenger automobile premiums were written in California.
The Company also offers homeowners, commercial automobile, commercial property, mechanical protection, fire, and umbrella insurance. Private passenger automobile lines of insurance business accounted for approximately 62% of the $5.5 billion of the Company’s direct premiums written in 2024, and approximately 84% of the private passenger automobile premiums were written in California.
Financial Statements and Supplementary Data." Capital Expenditures The Company's capital expenditures were approximately $36.8 million, $35.5 million and $41.4 million for 2023, 2022 and 2021, respectively, and they were primarily related to improving the Company's information technology infrastructure and corporate facilities.
Financial Statements and Supplementary Data." Capital Expenditures The Company's capital expenditures were approximately $46.1 million, $36.8 million and $35.5 million for 2024, 2023 and 2022, respectively, and they were primarily related to improving the Company's information technology infrastructure and 50 corporate facilities.
Excluding the effect of estimated prior periods’ loss development and catastrophe losses, the loss ratio was 77.4% and 81.3% for the years ended December 31, 2023 and 2022, respectively.
Excluding the effect of estimated prior periods’ loss development and catastrophe losses, the loss ratio was 66.8% and 77.4% for the years ended December 31, 2024 and 2023, respectively.
(1) Inflation For the Company’s California automobile lines of insurance business, total reserves are comprised of the following: 36 • BI reserves—approximately 70% of total reserves • Material damage ("MD") reserves, including collision and comprehensive property damage—approximately 10% of total reserves • Loss adjustment expense reserves—approximately 20% of total reserves.
(1) Inflation For the Company’s California automobile lines of insurance business, total reserves excluding salvage and subrogation are comprised of the following: • BI reserves—approximately 75% of total reserves • Material damage ("MD") reserves, including collision and comprehensive property damage—approximately 5% of total reserves • Loss adjustment expense reserves—approximately 20% of total reserves.
Bank Term SOFR plus 112.5-150.0 basis points November 16, 2026 200,000 25,000 Total principal amount 575,000 400,000 Less unamortized discount and debt issuance costs (3) 1,271 1,670 Total $ 573,729 $ 398,330 __________ (1) On March 8, 2017, the Company completed a public debt offering issuing $375 million of senior notes.
Bank Term SOFR plus 112.5-150.0 basis points November 18, 2027 200,000 200,000 Total principal amount 575,000 575,000 Less unamortized discount and debt issuance costs (3) 872 1,271 Total $ 574,128 $ 573,729 __________ (1) On March 8, 2017, the Company completed a public debt offering issuing $375 million of senior notes.
At December 31, 2022, fixed maturity holdings rated below investment grade and non-rated bonds totaled $6.6 million and $26.5 million, respectively, at fair value, and represented 0.2% and 0.6%, respectively, of total fixed maturity securities.
At December 31, 2024, fixed maturity holdings rated below investment grade and non-rated bonds totaled $6.2 million and $62.3 million, respectively, at fair value, and represented 0.1% and 1.3%, respectively, of total fixed maturity securities.
The Company incurred debt issuance costs of approximately $3.4 million, inclusive of underwriters' fees. The notes were issued at a slight discount of 99.847% of par, resulting in the effective annualized interest rate, including debt issuance costs, of approximately 4.45%. (2) On March 31, 2021, the Company entered into an unsecured $75 million five-year revolving credit facility.
The notes were issued at a slight discount of 99.847% of par, resulting in the effective annualized interest rate, including debt issuance costs, of approximately 4.45%. (2) On March 31, 2021, the Company entered into an unsecured $75 million five-year revolving credit facility. On November 18, 2022, the Company entered into the First Amendment to this credit facility.
As of February 13, 2024, a total of $200 million was drawn under this facility on a three-month revolving basis at an annual interest rate of approximately 6.84%, with $50 million available to be drawn.
As of February 11, 2025, a total of $200 million was drawn under this facility on a three-month revolving basis at an annual interest rate of approximately 5.79%, with $50 million available to be drawn.
Included in net income (loss) was $234.6 million of pre-tax net investment income that was generated during 2023 on a portfolio of $5.2 billion, at fair value, at December 31, 2023, compared to $168.4 million of pre-tax net investment income that was generated during 2022 on a portfolio of $4.9 billion, at fair value, at December 31, 2022.
Included in net income was $280.0 million of pre-tax net investment income that was generated during 2024 on a portfolio of $6.1 billion, at fair value, at December 31, 2024, compared to $234.6 million of pre-tax net investment income that was generated during 2023 on a portfolio of $5.2 billion, at fair value, at December 31, 2023.
At December 31, 2023, 43.8% of the Company’s total investment portfolio at fair value and 53.0% of its total fixed maturity investments at fair value were invested in tax-exempt state and municipal bonds.
At December 31, 2024, 36.4% of the Company’s total investment portfolio at fair value and 45.0% of its total fixed maturity investments at fair value were invested in tax-exempt state and municipal bonds.
The following table presents the typical closure patterns of BI claims in the Company's California personal automobile insurance coverage: % of Total Claims Closed Dollars Paid BI claims closed in the accident year reported 37% 12% BI claims closed one year after the accident year reported 78% 51% BI claims closed two years after the accident year reported 94% 76% BI claims closed three years after the accident year reported 98% 88% BI claims closed in the accident year reported are generally the smaller and less complex claims that settle for approximately $8,000 to $9,000 on average, whereas the total average settlement, once all claims are closed for a particular accident year, is approximately $18,000 to $28,000.
The following table presents the typical closure patterns of BI claims in the Company's California personal automobile insurance coverage: % of Total Claims Closed Dollars Paid BI claims closed in the accident year reported 38% 12% BI claims closed one year after the accident year reported 78% 53% BI claims closed two years after the accident year reported 93% 78% BI claims closed three years after the accident year reported 98% 89% BI claims closed in the accident year reported are generally the smaller and less complex claims that settle for approximately $10,000 to $11,000 on average, whereas the total average settlement, once all claims are closed for a particular accident year, is approximately $25,000 to $34,000.
Net premiums earned included ceded premiums earned of $109.4 million and $81.0 million in 2023 and 2022, respectively. Net premiums written included ceded premiums written of $109.6 million and $81.3 million in 2023 and 2022, respectively. The increase in ceded premiums earned and written resulted mostly from higher reinsurance coverage and rates and growth in the covered book of business.
Net premiums earned included ceded premiums earned of $136.7 million and $109.4 million in 2024 and 2023, respectively. Net premiums written included ceded premiums written of $138.0 million and $109.6 million in 2024 and 2023, respectively. The increases in ceded premiums earned and written resulted mostly from higher reinsurance coverage and rates and growth in the covered book of business.
Also included in net income (loss) were pre-tax net realized investment gains (losses) of $101.0 million and $(488.1) million in 2023 and 2022, respectively, and pre-tax catastrophe losses, net of reinsurance and reinstatement premiums earned, of approximately $239.2 million and $101.3 million in 2023 and 2022, respectively.
Also included in net income were pre-tax net realized investment gains of $88.7 million and $101.0 million in 2024 and 2023, respectively, and pre-tax catastrophe losses, net of reinsurance and reinstatement premiums earned, of approximately $277.0 million and $239.2 million in 2024 and 2023, respectively.
Municipal Securities The Company had $2.78 billion and $2.74 billion, or 64.3% and 67.0% of its fixed maturity securities portfolio, at fair value, in municipal securities at December 31, 2023 and 2022, respectively, of which $431.2 million and $395.2 million, respectively, were insured by bond insurers.
Municipal Securities The Company had $2.99 billion and $2.78 billion, or 60.8% and 64.3% of its fixed maturity securities portfolio, at fair value, in municipal securities at December 31, 2024 and 2023, respectively, of which $492.7 million and $431.2 million, respectively, were insured by bond insurers.
The weighted-average rating was AA- and A+ at December 31, 2023 and 2022, respectively. The modified duration reflecting anticipated early calls was 3.5 years and 4.6 years at December 31, 2023 and 2022, respectively.
The weighted-average rating was A and A- at December 31, 2024 and 2023, respectively. The modified duration reflecting anticipated early calls was 3.0 years and 2.4 years at December 31, 2024 and 2023, respectively.
The moderating inflationary trend in 2023 after the severe inflation in 2022 was a major contributor to the favorable reserve development in the private passenger automobile line of insurance business for 2023. The Company recorded catastrophe losses net of reinsurance of approximately $239 million in 2023.
The moderating inflationary trend in 2023 after the severe inflation in 2022 was a major contributor to the favorable reserve development in the private passenger automobile line of insurance business for 2023.
The following is a reconciliation of total net premiums earned to net premiums written: Year Ended December 31, 2023 2022 (Amounts in thousands) Net premiums earned $ 4,274,378 $ 3,952,482 Change in net unearned premiums 189,821 25,535 Net premiums written $ 4,464,199 $ 3,978,017 Expenses Loss and expense ratios are used to interpret the underwriting experience of property and casualty insurance companies.
The following is a reconciliation of total net premiums earned to net premiums written: Year Ended December 31, 2024 2023 (Amounts in thousands) Net premiums earned $ 5,075,456 $ 4,274,378 Change in net unearned premiums 302,854 189,821 Net premiums written $ 5,378,310 $ 4,464,199 Expenses Loss and expense ratios are used to interpret the underwriting experience of property and casualty insurance companies.
In 2022, inflationary trends accelerated to their highest level since the 1980s. Excessive inflation led to significant increases in loss severities related to vehicle repairs and bodily injuries. The severe inflationary trend continued into 2023, but began moderating as the year progressed. In addition, the COVID-19 pandemic created greater uncertainty in the reserve estimates.
In 2022, inflationary trends accelerated to their highest level since the 1980s. Excessive inflation led to significant increases in loss severities related to vehicle repairs and bodily injuries. The severe inflationary trend continued into 2023, but moderated as the year progressed.
Income tax expense (benefit) was $3.1 million and $(158.0) million for the years ended December 31, 2023 and 2022, respectively. The $161.1 million increase in income tax expense was mainly due to a significant increase in pre-tax income of $770.1 million. The Company’s effective income tax rate can be affected by several factors.
Income tax expense was $106.9 million and $3.1 million for the years ended December 31, 2024 and 2023, respectively. The $103.8 million increase in income tax expense was mainly due to a significant increase in pre-tax income of $475.5 million. The Company’s effective income tax rate can be affected by several factors.
Regulatory and Legal Matters The process for implementing rate changes varies by state. For more detailed information related to insurance rate approval, see "Item 1. Business—Regulation." During 2023, the Company implemented rate changes in 11 states.
Regulatory and Legal Matters The process for implementing rate changes varies by state. For more detailed information related to insurance rate approval, see "Item 1.
For catastrophe losses, the Company generally determines claim counts based on claims reported and development expectations from previous catastrophes and applies an average expected loss per claim based on loss reserves established by adjusters and average losses on previous similar catastrophes.
For catastrophe losses, the Company generally determines claim counts based on claims reported and development expectations from previous catastrophes and applies an average expected loss per claim based on loss reserves established by adjusters and average losses on previous similar catastrophes. There are many factors that can cause variability between the ultimate expected loss and the actual developed loss.
The Company's debt to total capital ratio was 27.1% at December 31, 2023, resulting in a 17.5 basis point commitment fee on any undrawn portion of the credit facility.
The Company's debt to total capital ratio was 22.8% at December 31, 2024, resulting in a 15.0 basis point commitment fee on any undrawn portion of the credit facility.
There are many factors that can affect the number of claims reported after an accident period ends. These factors include changes in weather patterns, a change in the number of litigated files, the number of automobiles insured, and whether the last day of the accident period falls on a weekday or a weekend.
These factors include changes in weather patterns, a change in the number of litigated files, the number of automobiles insured, and whether the last day of the accident period falls on a weekday or a weekend.
The Company’s municipal bond holdings, of which 82.4% were tax exempt, represented 64.3% of its fixed maturity portfolio at December 31, 2023, at fair value, and were broadly diversified geographically.
The Company’s municipal bond holdings, of which 74.0% were tax exempt, represented 60.8% of its fixed maturity portfolio at December 31, 2024, at fair value, and were broadly diversified geographically.
Investments The following table presents the investment results of the Company: Year Ended December 31, 2023 2022 (Amounts in thousands) Average invested assets at cost (1) $ 5,096,428 $ 4,902,755 Net investment income (2) Before income taxes $ 234,630 $ 168,356 After income taxes $ 200,209 $ 146,204 Average annual yield on investments (2) Before income taxes 4.6 % 3.4 % After income taxes 3.9 % 3.0 % Net realized investment gains (losses) $ 101,014 $ (488,080) __________ (1) Fixed maturities and short-term bonds at amortized cost; equities and other short-term investments at cost.
Investments The following table presents the investment results of the Company: Year Ended December 31, 2024 2023 (Amounts in thousands) Average invested assets at cost (1) $ 5,683,973 $ 5,096,428 Net investment income (2)(3) Before income taxes $ 279,989 $ 234,630 After income taxes $ 235,419 $ 200,209 Average annual yield on investments (2) Before income taxes 4.5 % 4.3 % After income taxes 3.8 % 3.7 % Net realized investment gains (losses) $ 88,671 $ 101,014 __________ (1) Fixed maturities and short-term bonds at amortized cost; equities and other short-term investments at cost.
Net Income (Loss) Year Ended December 31, 2023 2022 (Amounts in thousands, except per share data) Net income (loss) $ 96,336 $ (512,672) Basic average shares outstanding 55,371 55,371 Diluted average shares outstanding 55,371 55,371 Basic Per Share Data: Net income (loss) $ 1.74 $ (9.26) Net realized investment gains (losses), net of tax $ 1.44 $ (6.96) Diluted Per Share Data: Net income (loss) $ 1.74 $ (9.26) Net realized investment gains (losses), net of tax $ 1.44 $ (6.96) 42 Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 See "Item 7.
Net Income Year Ended December 31, 2024 2023 (Amounts in thousands, except per share data) Net income $ 467,953 $ 96,336 Basic average shares outstanding 55,373 55,371 Diluted average shares outstanding 55,377 55,371 Basic Per Share Data: Net income $ 8.45 $ 1.74 Net realized investment gains, net of tax $ 1.27 $ 1.44 Diluted Per Share Data: Net income $ 8.45 $ 1.74 Net realized investment gains, net of tax $ 1.26 $ 1.44 43 Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 See "Item 7.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe following table presents municipal securities by state in descending order of holdings at fair value at December 31, 2023: States Fair Value Average Rating (Amounts in thousands) Florida $ 301,743 A Texas 234,404 AA- California 217,330 AA- New York 206,272 AA- Illinois 172,500 A+ Other states 1,645,009 A+ Total $ 2,777,258 At December 31, 2023, the municipal securities portfolio was broadly diversified among the states and the largest holdings were in populous states such as Florida and Texas.
Biggest changeThe following table presents municipal securities by state in descending order of holdings at fair value at December 31, 2024: States Fair Value Average Rating (Amounts in thousands) Florida $ 345,934 A California 258,847 AA- Texas 210,911 AA- New York 189,504 AA Illinois 142,821 A+ Other states 1,839,037 A+ Total $ 2,987,054 At December 31, 2024, the municipal securities portfolio was broadly diversified among the states and the largest holdings were in populous states such as Florida and California.
Credit Risk Credit risk results from uncertainty in a counterparty’s ability to meet its obligations. Credit risk is managed by maintaining a high credit quality fixed maturity securities portfolio. As of December 31, 2023, the estimated weighted-average credit quality rating of the fixed maturity securities portfolio was A+, at fair value, consistent with the average rating at December 31, 2022.
Credit Risk Credit risk results from uncertainty in a counterparty’s ability to meet its obligations. Credit risk is managed by maintaining a high credit quality fixed maturity securities portfolio. As of December 31, 2024, the estimated weighted-average credit quality rating of the fixed maturity securities portfolio was A+, at fair value, consistent with the average rating at December 31, 2023.
Equity Price Risk Equity price risk is the risk that the Company will incur losses due to adverse changes in the equity markets. At December 31, 2023, the Company’s primary objective for common equity investments was current income.
Equity Price Risk Equity price risk is the risk that the Company will incur losses due to adverse changes in the equity markets. At December 31, 2024, the Company’s primary objective for common equity investments was current income.
The proceeds from the called fixed maturity securities would likely be reinvested at lower yields, which would result in lower overall investment income for the Company. 53
The proceeds from the called fixed maturity securities would likely be reinvested at lower yields, which would result in lower overall investment income for the Company. 54
Based on hypothetical reductions in the overall value of the stock market, the following table illustrates estimated reductions in the overall value of the Company’s common stock portfolio at December 31, 2023 and 2022: December 31, 2023 2022 (Amounts in thousands, except Average Beta) Average Beta 0.87 0.84 Hypothetical reduction of 25% in the overall value of the stock market $ 129,742 $ 116,518 Hypothetical reduction of 50% in the overall value of the stock market $ 259,483 $ 233,036 Interest Rate Risk Interest rate risk is the risk that the Company will incur a loss due to adverse changes in interest rates relative to the interest rate characteristics of interest bearing assets and liabilities.
Based on hypothetical reductions in the overall value of the stock market, the following table illustrates estimated reductions in the overall value of the Company’s common stock portfolio at December 31, 2024 and 2023: December 31, 2024 2023 (Amounts in thousands, except Average Beta) Average Beta 0.90 0.87 Hypothetical reduction of 25% in the overall value of the stock market $ 166,252 $ 129,742 Hypothetical reduction of 50% in the overall value of the stock market $ 332,504 $ 259,483 Interest Rate Risk Interest rate risk is the risk that the Company will incur a loss due to adverse changes in interest rates relative to the interest rate characteristics of interest bearing assets and liabilities.
The fixed maturity portfolio at December 31, 2023, which represented 82.6% of total investments at December 31, 2023, at fair value, is subject to interest rate risk. As market interest rates decrease, the value of the portfolio increases and vice versa.
The fixed maturity portfolio at December 31, 2024, which represented 80.9% of total investments at December 31, 2024, at fair value, is subject to interest rate risk. As market interest rates decrease, the value of the portfolio increases and vice versa.
Taxable fixed maturity securities represented 47.0% of the Company’s fixed maturity portfolio at December 31, 2023. 8.6% of the Company’s taxable fixed maturity securities were comprised of U.S. government bonds, which were rated AAA at December 31, 2023. 0.2% of the Company’s taxable fixed maturity securities, representing 0.1% of its total fixed maturity portfolio, were rated below investment grade at December 31, 2023.
Taxable fixed maturity securities represented 55.0% of the Company’s fixed maturity portfolio at December 31, 2024. 3.5% of the Company’s taxable fixed maturity securities were comprised of U.S. government bonds, which were rated AAA at December 31, 2024. 0.2% of the Company’s taxable fixed maturity securities, representing 0.1% of its total fixed maturity portfolio, were rated below investment grade at December 31, 2024.
The modified duration of the overall fixed maturity securities portfolio reflecting anticipated early calls was 3.0 years at December 31, 2023. If interest rates were to rise by 100 and 200 basis points, the Company estimates that the fair value of its fixed maturity securities portfolio at December 31, 2023 would decrease by $134.1 million and $268.2 million, respectively.
The modified duration of the overall fixed maturity securities portfolio reflecting anticipated early calls was 3.4 years at December 31, 2024. If interest rates were to rise by 100 and 200 basis points, the Company estimates that the fair value of its fixed maturity securities portfolio at December 31, 2024 would decrease by $178.9 million and $357.9 million, respectively.
The fair 52 value of the equity investments consisted of $597.9 million in common stocks, $51.6 million in non-redeemable preferred stocks, and $81.2 million in private equity funds. Common stocks are typically valued for future economic prospects as perceived by the market. Common stocks represented 11.4% of total investments at fair value at December 31, 2023.
The fair 53 value of the equity investments consisted of $741.4 million in common stocks, $42.6 million in non-redeemable preferred stocks, and $95.2 million in private equity funds. Common stocks are typically valued for future economic prospects as perceived by the market. Common stocks represented 12.2% of total investments at fair value at December 31, 2024.

Other MCY 10-K year-over-year comparisons