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What changed in MERCURY GENERAL CORP's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of MERCURY GENERAL CORP's 2024 and 2025 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 2025 report.

+293 added−277 removedSource: 10-K (2026-02-17) vs 10-K (2025-02-11)

Top changes in MERCURY GENERAL CORP's 2025 10-K

293 paragraphs added · 277 removed · 245 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

76 edited+15 added−7 removed78 unchanged
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.
Biggest changeThe direct premiums written for the years ended December 31, 2025, 2024 and 2023 by state and line of insurance business were: Year Ended December 31, 2025 (Dollars in thousands) Private Passenger Automobile Homeowners Commercial Automobile Other Lines (2) Total California $ 3,082,828 $ 1,170,943 $ 299,586 $ 356,431 $ 4,909,788 82.1 % Texas 122,638 214,498 57,696 6,628 401,460 6.7 % Other states (1) 385,749 245,479 30,098 9,963 671,289 11.2 % Total $ 3,591,215 $ 1,630,920 $ 387,380 $ 373,022 $ 5,982,537 100.0 % 60.0 % 27.3 % 6.5 % 6.2 % 100.0 % 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 % _____________ (1) No individual state accounted for more than 5% of total direct premiums written.
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.
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 13 Operating Officer in January 2022, and President and Chief Operating Officer in January 2024. Mr. Victor Joseph is Mr. George Joseph’s son. Mr.
These assets consist primarily of premium receivables that are outstanding for more than 90 days, deferred tax assets that do not meet statutory requirements for recognition, furniture, equipment, leasehold improvements, capitalized software, and prepaid expenses. • Amounts related to ceded reinsurance are shown gross as prepaid reinsurance premiums and reinsurance recoverables, whereas under SAP, these amounts are netted against unearned premium reserves and loss and loss adjustment expense reserves. • Fixed-maturity securities are reported at fair value, whereas under SAP, these securities are reported at amortized cost, or the lower of amortized cost, or fair value, depending on the specific type of security. • Equity securities are marked to market through the consolidated statements of operations, whereas under SAP, these securities are marked to market through unrealized gains and losses in surplus. • Goodwill is reported as the excess of cost of an acquired entity over the fair value of the underlying assets and assessed periodically for impairment.
These assets consist primarily of premium receivables that are outstanding for more than 90 days, deferred tax assets that do not meet statutory requirements for recognition, furniture, equipment, leasehold improvements, capitalized software, and prepaid expenses. • Amounts related to ceded reinsurance are shown gross as prepaid reinsurance premiums and reinsurance recoverables, whereas under SAP, these amounts are netted against unearned premium reserves and loss and loss adjustment expense reserves. • Fixed-maturity securities are reported at fair value, whereas under SAP, these securities are reported at amortized cost, or the lower of amortized cost, or fair value, depending on the specific type of security. • Equity securities are marked to market through the consolidated statements of operations, whereas under SAP, these securities are marked to market through unrealized gains and losses in surplus. • Goodwill is reported as the excess of cost of an acquired entity over the fair value of the underlying net assets and assessed periodically for impairment.
Some of the significant differences under GAAP are described below: • Policy acquisition costs such as commissions, premium taxes, and other costs that vary with and are primarily related to the successful acquisition of new and renewal insurance contracts, are capitalized and amortized on a pro rata basis over the period in which the related premiums are earned, whereas under SAP, these costs are expensed as incurred. • Certain assets are included in the consolidated balance sheets, whereas under SAP, such assets are designated as "nonadmitted assets," and charged directly against statutory surplus.
Some of the significant differences under GAAP are described below: 5 • Policy acquisition costs such as commissions, premium taxes, and other costs that vary with and are primarily related to the successful acquisition of new and renewal insurance contracts, are capitalized and amortized on a pro rata basis over the period in which the related premiums are earned, whereas under SAP, these costs are expensed as incurred. • Certain assets are included in the consolidated balance sheets, whereas under SAP, such assets are designated as "nonadmitted assets," and charged directly against statutory surplus.
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.
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. 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.
The Holding Company Act also requires filing of an annual enterprise risk report identifying the material risks within the insurance holding company system. California-domiciled insurance companies are also required to notify the California DOI of any dividend after declaration, but prior to payment. There are similar limitations imposed by other states on the Insurance Companies’ ability to pay dividends.
The Holding Company Act also requires filing of an annual enterprise risk report identifying the material risks within the insurance holding company system. California-domiciled insurance companies are also required to notify the California DOI of any dividend after 12 declaration, but prior to payment. There are similar limitations imposed by other states on the Insurance Companies’ ability to pay dividends.
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.
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.
(2) Approximately 10% of this layer covers California, Arizona, Nevada and Texas only, and has a maximum contribution 9 limit to ultimate net loss from all losses in Texas of $425 million. (3) Approximately 14% of this layer excludes losses from named storms.
(2) Approximately 10% of this layer covers California, Arizona, Nevada and Texas only, and has a maximum contribution limit to ultimate net loss from all losses in Texas of $425 million. (3) Approximately 14% of this layer excludes losses from named storms.
The statutory underwriting profit margin is the extent to which the combined loss and expense ratios are less than 100%. 6 The following table presents, on a statutory basis, the Insurance Companies’ loss, expense and combined ratios, and the private passenger automobile industry combined ratio.
The statutory underwriting profit margin is the extent to which the combined loss and expense ratios are less than 100%. The following table presents, on a statutory basis, the Insurance Companies’ loss, expense and combined ratios, and the private passenger automobile industry combined ratio.
The Company reimburses a group of affiliates of a ceding company for a proportional share of a portfolio of catastrophe losses based on the premiums ceded to the Company under the Contract, to the extent the actual loss ratio exceeds the threshold loss ratio of 73.5%.
The Company reimburses a group of affiliates of a ceding company for a proportional share of a portfolio of catastrophe losses based on the premiums ceded to the Company under the Contract, to the extent the 8 actual loss ratio exceeds the threshold loss ratio of 73.5%.
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 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 2025.
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.
There were no CIGA assessments in 2025. 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.
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.
The Company periodically monitors the RBC level of each of the Insurance Companies. As of December 31, 2025, 2024 and 2023, each of the Insurance Companies exceeded the minimum required RBC level. For more detailed information, see "Liquidity and Capital Resources—F. Regulatory Capital 11 Requirements" in "Item 7.
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.
There were no assessments made in 2025. The Insurance Companies in other states are also subject to the provisions of similar insurance guaranty associations. There were no material assessments during 2025 in other states that cannot be recouped through a premium tax credit or a surcharge to policyholders.
(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.
(2) The Company has a per-risk reinsurance treaty covering losses of $7.5 million in excess of $7.5 million, and facultative reinsurance coverage for losses above $15 million subject to some coverage limitations for certain commercial property policies with multiple structures.
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.
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 2 States of America. In addition, Mercury's technology subsidiary, Mercury Shanghai, has approximately 80 employees working at a leased office space in Shanghai, China.
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.
The Company's private passenger automobile renewal rate in California (the rate of acceptance of offers to renew) averaged approximately 99%, 99%, and 95% in 2025, 2024, and 2023, 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 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.
The severe inflationary trend of 2022 continued into 2023, but moderated as the year progressed. During 2024 and 2025, the inflation rate continued to be moderate for automobile parts and labor but it was at an elevated level for bodily injury costs.
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.
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 $221 million and $101 million if the full amount of benefit is used for the 12 months ending June 30, 2026 and 2025, respectively.
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 made direct financial contributions of approximately $38,000 and $0 to officeholders and candidates in 2025 and 2024, 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 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.
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 4,300 employees at December 31, 2025.
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.
In 2025, the Company incurred approximately $32 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.
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.
No interest income was earned on cash in 2021. (4) Net investment income before and after income taxes for 2025 increased compared to 2024, primarily due to higher average invested assets and cash combined with higher average yield.
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.
Walters 79 Vice President, Corporate Affairs and Secretary Simon Zhang 49 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.
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.
Based on the most recent regularly published statistical compilations of premiums written in 2024, the Company was the eighth largest writer of private passenger automobile insurance in California and the fifteenth largest in the United States. The property and casualty insurance industry is highly cyclical, with alternating hard and soft market conditions.
(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.
(3) The majority of the Company’s homeowners policies have liability coverage limits of $300,000 or less, a replacement value of $750,000 or less, and a total insured value of $2,000,000 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.
No reinsurance benefits were available under the Treaty for these losses as none of the 2023 catastrophe events individually resulted in losses in excess of the Company’s per-occurrence retention limit of $100 million and $60 million under the Treaty for the 12 months ending June 30, 2024 and 2023, 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.
The Company is the assuming reinsurer under a Catastrophe Portfolio Participation Reinsurance Contract ("Contract") effective through December 31, 2025.
The Company is the assuming reinsurer under a Catastrophe Portfolio Participation Reinsurance Contract ("Contract") effective through December 31, 2028.
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.
Best, Aggregates & Averages (2021 through 2024), for all property and casualty insurance companies (private passenger automobile line only, after policyholder dividends). 6 Premiums to Surplus Ratio The following table presents the Insurance Companies’ statutory ratios of net premiums written to policyholders’ surplus.
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.
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, 2025, the most recent date at which information was available, was $89.3 million.
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.
Year Ended December 31, 2025 2024 2023 2022 2021 Loss ratio (Company-wide) 72.0 % 72.6 % 82.3 % 85.1 % 73.8 % Expense ratio (Company-wide) 24.5 % 23.5 % 23.5 % 24.4 % 24.9 % Combined ratio (Company-wide) 96.5 % 96.1 % 105.8 % 109.5 % 98.7 % Combined ratio (Company's private passenger automobile only) 89.5 % 93.1 % 103.0 % 110.3 % 96.0 % Industry combined ratio (all writers) (1) N/A 94.8 % 104.6 % 111.7 % 100.7 % Industry combined ratio (excluding direct writers) (1) N/A 93.9 % 102.2 % 104.6 % 99.4 % ____________ (1) Source: A.M.
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.
Average invested assets at cost are based on the monthly amortized cost of the invested assets for each period. (2) At December 31, 2025, fixed maturity securities with call features totaled $4.4 billion at fair value and amortized cost.
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.
The Insurance Companies’ ratios (Company-wide) include lines of insurance business other than private passenger automobile that accounted for approximately 40.0% of direct premiums written in 2025; hence, the Company believes its combined ratio (for private passenger automobile only) is more comparable to the industry ratios.
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.
Financial Statements and Supplementary Data." 7 Investment Results The following table presents the investment results of the Company for the most recent five years: Year Ended December 31, 2025 2024 2023 2022 2021 (Dollars in thousands) Average invested assets at cost (1) (2) $ 5,968,575 $ 5,683,973 $ 5,096,428 $ 4,902,755 $ 4,681,462 Net investment income (3)(4) Before income taxes $ 328,701 $ 279,989 $ 234,630 $ 168,356 $ 129,727 After income taxes $ 276,214 $ 235,419 $ 200,209 $ 146,204 $ 115,216 Average annual yield on investments (3)(4) Before income taxes 4.7 % 4.5 % 4.3 % 3.4 % 2.8 % After income taxes 4.0 % 3.8 % 3.7 % 3.0 % 2.5 % Net realized investment gains (losses) after income taxes $ 103,781 $ 70,050 $ 79,801 $ (385,583) $ 88,210 __________ (1) Fixed maturities and short-term bonds at amortized cost; equities and other short-term investments at cost.
The Holding Company Act requires disclosure of any material transactions among affiliates within a holding company system. Some transactions require advance notice and may not be made if the California DOI disapproves the transaction within 30 days after notice.
The California DOI may examine the affairs of each of the California Companies at any time. The Holding Company Act requires disclosure of any material transactions among affiliates within a holding company system. Some transactions require advance notice and may not be made if the California DOI disapproves the transaction within 30 days after notice.
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.
Year Ended December 31, 2025 2024 2023 2022 2021 (Amounts in thousands, except ratios) Net premiums written $ 5,721,778 $ 5,378,310 $ 4,464,199 $ 3,978,017 $ 3,855,369 Policyholders’ surplus $ 2,392,286 $ 2,030,460 $ 1,667,187 $ 1,502,424 $ 1,827,210 Ratio 2.4 to 1 2.7 to 1 2.7 to 1 2.7 to 1 2.1 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.
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%.
In California, "good drivers," as defined by the California Insurance Code, accounted for approximately 85% of the Company's California voluntary private passenger automobile policies-in-force at December 31, 2025, while higher risk categories accounted for approximately 15%.
(3) Net investment income includes approximately $25.5 million, $14.5 million, and $0.5 million of interest income earned on cash (approximately $20.2 million, $11.5 million, and $0.4 million after tax) for the years ended December 31, 2024, 2023, and 2022, respectively. Average annual yield on investments does not include interest income earned on cash.
(3) Net investment income includes approximately $50.7 million, $25.5 million, and $14.5 million of interest income earned on cash (approximately $40.1 million, $20.2 million, and $11.5 million after tax) for the years ended December 31, 2025, 2024, and 2023, respectively. Average annual yield on investments does not include interest income earned on cash.
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.
For the 12 months ending June 30, 2026 and 2025, the Treaty provides $2,140 million and $1,290 million of coverage, respectively, on a per occurrence basis after covered catastrophe losses exceed the Company retention limit of $200 million and $150 million, respectively.
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.
The table below presents the combined total reinsurance premiums under the Treaty (annual premiums and reinstatement premiums) for the 12 months ending June 30, 2026 and 2025, respectively: Treaty Annual Premium (1) Reinstatement Premium (2) Total Combined Premium (2) (Amounts in millions) For the 12 months ending June 30, 2026 $ 237 $ — $ 237 For the 12 months ended June 30, 2025 $ 105 $ 101 $ 206 __________ (1) The increase in the annual premium is primarily due to higher reinsurance coverage and rates, growth in the covered book of business, and an evolving view of risk by the reinsurers.
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.
As of December 31, 2025, the Insurance Companies are permitted to pay in 2026, without obtaining DOI approval for extraordinary dividends, $448 million in dividends to Mercury General, of which $422 million may be paid by the California Companies.
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.
Excluding AIS and PoliSeek, independent agents and agencies collectively accounted for approximately 88% of the Company's direct premiums written in 2025 and no single independent agent or agency accounted for more than 3.0% of the Company’s direct premiums written during any of the last three years.
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.
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. Chan, Vice President and Chief Human Resources Officer, joined the Company in 2026.
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.
The catastrophe events that occurred in 2024 caused approximately $244 million in losses to the Company before reinsurance as of December 31, 2025, resulting primarily from tornadoes, hailstorms and convective storms in Texas and 10 Oklahoma, winter storms, rainstorms and wildfires in California, and the impact of Hurricane Helene in Florida and Georgia.
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.
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, 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.
("CGU") (1) 1985 A CA Mercury Insurance Company of Illinois 1989 A IL, NJ Mercury Insurance Company of Georgia 1989 A GA Mercury Indemnity Company of Georgia 1991 A GA American Mercury Insurance Company 1996 A OK, CA, TX, VA American Mercury Lloyds Insurance Company ("AML") 1996 A TX Mercury County Mutual Insurance Company 2000 A TX Mercury Indemnity Company of America 2001 A FL, NJ Orion Indemnity Company ("OIC") (1) 2015 A CA Non-Insurance Companies Formed or Acquired Purpose Mercury Select Management Company, Inc. 1997 AML’s attorney-in-fact Mercury Insurance Services LLC 2000 Management services to subsidiaries AIS Management LLC 2009 Parent company of AIS and PoliSeek Auto Insurance Specialists LLC ("AIS") 2009 Insurance agency PoliSeek AIS Insurance Solutions, Inc.
("CGU") (1) 1985 A CA Mercury Insurance Company of Illinois 1989 A IL, NJ Mercury Insurance Company of Georgia 1989 A GA Mercury Indemnity Company of Georgia 1991 A GA American Mercury Insurance Company 1996 A OK, CA, TX, VA Mercury Insurance Company of Texas (2) 1996 A TX Mercury County Mutual Insurance Company 2000 A TX Mercury Indemnity Company of America 2001 A FL, NJ Orion Indemnity Company ("OIC") (1) 2015 A CA Non-Insurance Companies Formed or Acquired Purpose Mercury Select Management Company, Inc. 1997 Third party administrator for Mechanical Protection service contracts Mercury Insurance Services LLC 2000 Management services to subsidiaries AIS Management LLC 2009 Parent company of AIS and PoliSeek Auto Insurance Specialists LLC ("AIS") 2009 Insurance agency PoliSeek AIS Insurance Solutions, Inc.
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.
Information about the Company's Executive Officers The following table presents certain information concerning the executive officers of the Company as of February 12, 2026: Name Age Position George Joseph 104 Chairman of the Board Gabriel Tirador 61 Chief Executive Officer Victor G. Joseph 39 President and Chief Operating Officer Theodore R.
Tax considerations are important in portfolio management. The Company closely monitors the timing and recognition of capital gains and losses to maximize the realization of any deferred tax assets arising from capital losses.
Tax considerations are important in portfolio management. The Company closely monitors the timing and recognition of capital gains and losses to maximize the realization of any deferred tax assets arising from capital losses. The Company had no capital loss carryforward at December 31, 2025.
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.
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, 2025 2024 2023 (Amounts in thousands) Gross reserves at January 1 (1) $ 3,152,031 $ 2,785,702 $ 2,584,910 Reinsurance recoverables on unpaid losses (28,645) (32,148) (25,323) Net reserves at January 1 (1) 3,123,386 2,753,554 2,559,587 Incurred losses and loss adjustment expenses related to: Current year 4,055,014 3,659,724 3,553,801 Prior years (91,983) 24,787 (35,948) Total incurred losses and loss adjustment expenses 3,963,031 3,684,511 3,517,853 Loss and loss adjustment expense payments related to: Current year 2,060,739 1,963,076 2,080,690 Prior years 1,426,348 1,351,603 1,243,196 Total payments 3,487,087 3,314,679 3,323,886 Net reserves at December 31 (1) 3,599,330 3,123,386 2,753,554 Reinsurance recoverables on unpaid losses 34,008 28,645 32,148 Gross reserves at December 31 (1) $ 3,633,338 $ 3,152,031 $ 2,785,702 _____________ (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 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.
Average annual yield on investments before and after income taxes for 2025 increased compared to 2024, primarily due to the maturity and replacement of lower yielding investments purchased when market interest rates were lower with higher yielding investments, combined with the higher average yield on investments purchased in 2025 using cash generated from operations compared to the average yield on overall investments in 2024.
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.
Production and Servicing of Business The Company sells its policies through a network of approximately 8,510 independent agents, its 100% owned insurance agencies, AIS and PoliSeek, and directly through internet sales portals. Approximately 2,670, 1,140, and 1,910 of the independent agents are located in California, Florida, and Texas, respectively.
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 Company experienced favorable development of approximately $23 million, unfavorable development of approximately $9 million, and favorable development of approximately $8 million on prior years' catastrophe losses in 2025, 2024, and 2023, respectively. 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.
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.
Petro 62 Vice President and Chief Claims Officer Mark Ribisi 63 President and Chief Executive Officer of AIS Management LLC Jeffrey M. Schroeder 49 Vice President and Chief Product Officer Erik Thompson 57 Vice President and Chief Marketing Officer Charles Toney 64 Vice President and Chief Actuary Judy A.
The Treaty specifically excludes coverage for any Florida business and for California earthquake losses on fixed property policies such as homeowners, but does cover losses from fires following an earthquake. The Treaty includes additional restrictions as noted in the tables below.
The Treaty ending June 30, 2026 and 2025 each excludes coverage for any Florida business and for California earthquake losses on fixed property policies such as homeowners, but does cover losses from fires following an earthquake with certain exceptions as shown below. The Treaty ending June 30, 2026 and 2025 each includes additional restrictions as noted below.
The total possible amount of losses for the Company under the Contract is $30.0 million for each of the 12 month periods ending December 31, 2023 through 2025 and $25.0 million for the 12 months ended December 31, 2022.
The total assumed premium under the Contract is approximately $15 million for each of the 12 month periods ending December 31, 2023 through 2028. The total possible amount of losses for the Company under the Contract is approximately $30.0 million for each of the 12 month periods ending December 31, 2023 through 2028.
The Company is the assuming reinsurer under a Property Quota Share Reinsurance Contract ("Quota Share") and reimburses ceding companies for a proportional share of losses based on the premiums ceded to the Company under the Quota Share. The total annual assumed premium under the Quota Share is approximately $11 million.
The Company is the assuming reinsurer under a Property Quota Share Reinsurance Contract ("Quota Share Contract") effective through December 31, 2026 and reimburses ceding companies for a proportional share of losses based on the premiums ceded to the Company under the Quota Share Contract.
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.
The Company recognized approximately $1 million, $2 million, and $10 million in incurred losses under the Contract for the 12 months ended December 31, 2025, 2024, and 2023, respectively.
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.
Investment Portfolio The following table presents the composition of the Company’s total investment portfolio: December 31, 2025 2024 2023 Cost (1) Fair Value Cost (1) Fair Value Cost (1) Fair Value (Amounts in thousands) Taxable bonds $ 2,582,848 $ 2,560,651 $ 2,759,532 $ 2,704,046 $ 2,102,740 $ 2,031,594 Tax-exempt state and municipal bonds 2,866,878 2,869,600 2,222,926 2,209,332 2,292,243 2,287,742 Total fixed maturities 5,449,726 5,430,251 4,982,458 4,913,378 4,394,983 4,319,336 Equity securities 728,460 812,787 795,068 879,175 654,939 730,693 Short-term investments 336,978 336,992 283,792 283,817 179,375 178,491 Total investments $ 6,515,164 $ 6,580,030 $ 6,061,318 $ 6,076,370 $ 5,229,297 $ 5,228,520 __________ (1) Fixed maturities and short-term bonds at amortized cost; equities and other short-term investments at cost.
Prior to 2008, she held various leadership positions at Kaiser Permanente, Progressive Insurance, and Score Educational Centers. Mr. Thompson, Vice President, Chief Marketing Officer, joined the Company as Director of Advertising in 2005, and was appointed Vice President, Advertising and Public Relations in October 2017. Prior to joining the Company, Mr.
Prior to joining the Company, Mr. Schroeder was a Product Manager at 21st Insurance Company. Mr. Thompson, Vice President, Chief Marketing Officer, joined the Company as Director of Advertising in 2005, and was appointed Vice President, Advertising and Public Relations in October 2017. Prior to joining the Company, Mr.
("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.
("Mercury Shanghai") 2024 Software development and related technical services to other subsidiaries Upper Animas Holdings LLC 2024 Special purpose investment vehicle _____________ (1) The term "California Companies" refers to MCC, MIC, CAIC, CGU, and OIC. 3 (2) Effective August 13, 2025, American Mercury Lloyds Insurance Company was converted from a Lloyd's plan to a stock company and changed the company name to Mercury Insurance Company of Texas.
(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.
(2) The reinstatement premium and the total combined premium for the treaty period ending June 30, 2026 are projected amounts to be paid based on the latest information available. The reinstatement premium and the total combined premium for the treaty period ended June 30, 2025 are based on actual amounts paid.
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.
Coverage on individual catastrophes provided for the 12 months ending June 30, 2026 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 $ — $ 200 — % Layer of Coverage (1) 200 300 90.0 Layer of Coverage (2) 300 1,000 100.0 Layer of Coverage (3) (4) (5) 1,000 1,600 100.0 Layer of Coverage (6) 1,600 1,750 100.0 Layer of Coverage (2) 1,750 2,350 100.0 __________ (1) 10% of this layer is not subject to reinstatement.
(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 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.
The increase in the provision for insured events of prior years in 2022 of approximately $47.3 million primarily resulted from higher than estimated losses and loss adjustment expenses in the automobile line of insurance business.
The decrease in the provision for insured events of prior years in 2025 of approximately $92.0 million primarily resulted from lower than estimated losses and loss adjustment expenses in the automobile and homeowners lines of insurance business, including favorable development on the prior years' catastrophe losses.
The 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 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.
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.
The majority of 2024 catastrophe losses resulted from tornadoes, hailstorms and convective storms in Texas and Oklahoma, winter storms, rainstorms and wildfires in California, and the impact of Hurricane Helene in Florida and Georgia.
The total annual possible amount of losses for the Company under the Quota Share is approximately $32 million. The Quota Share commenced on January 1, 2025 and is effective through December 31, 2025. The Company is the ceding party to a Catastrophe Reinsurance Treaty ("Treaty") covering a wide range of perils that is effective through June 30, 2025.
The Company is the ceding party to a Catastrophe Reinsurance Treaty ("Treaty") covering a wide range of perils that is effective through June 30, 2026.
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.
The majority of 2023 catastrophe losses resulted from rainstorms and hail in Texas and Oklahoma, winter storms and rainstorms in California, and the impact of Tropical Storm Hilary in California.
(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 percent of coverage of 90% noted for this layer is for the first catastrophe event. In the event of the second catastrophe, the percent of coverage for this layer is 80%. (2) Layer of Coverage represents multiple actual treaty layers that are grouped for presentation purposes. (3) Approximately 16.5% of this layer excludes losses from fires following an earthquake.
The total assumed premium under the Contract is $15.0 million for each of the 12 month periods ending December 31, 2023 through 2025 and $10.0 million for the 12 months ended December 31, 2022.
The total annual assumed premium under the Quota Share Contract is approximately $17 million and $11 million for the 12 months ending December 31, 2026 and 2025, respectively.
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.
Chan 52 Vice President and Chief Human Resources Officer Nick Colby 41 Vice President and Chief Sales Officer Katie Gibbs 36 Vice President and Chief Experience Officer Christopher Graves 60 Vice President and Chief Investment Officer Wei Pang 49 Vice President and Chief Technology Officer Randall R.
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 Treaty ending June 30, 2026 and 2025 each provides for one full reinstatement of coverage limits except for certain layers of coverage noted in the tables above.
Prior to joining the Company, Mr. Schroeder was a Product Manager at 21st Insurance Company. Ms. Sullivan, Vice President and Chief Human Capital Officer, joined the Company in 2012. Prior to joining the Company, she served as Senior Vice President, Human Capital for Arcadian Health Plan from 2008 to 2012.
Prior to joining the Company, she served as the Chief People Officer at Arctera from 2024 to 2025. Prior to 2024, she held multiple senior leadership roles at Accenture, including Chief Human Resources Officer for a division and Global Head of Health and Well-Being. Mr. Colby, Vice President and Chief Sales Officer, joined the Company in 2025.
Holding Company Act The California Companies are subject to California DOI regulation pursuant to the provisions of the California Insurance Holding Company System Regulatory Act (the "Holding Company Act"). The California DOI may examine the affairs of each of the California Companies at any time.
Loss and Loss Adjustment Expense Reserves, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" for additional information. Holding Company Act The California Companies are subject to California DOI regulation pursuant to the provisions of the California Insurance Holding Company System Regulatory Act (the "Holding Company Act").
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.
The Company has historically seen premium growth during hard market conditions. The Company believes that the automobile insurance market in most states went through a transitional period from hard to softening market conditions during 2025 as many insurance carriers experienced improved profitability and increased competition, with inflation easing and rates stabilizing.
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.
None of the 2025 catastrophe events, other than the Palisades and Eaton wildfires, individually resulted in losses in excess of the Company's per-occurrence retention limit of $200 million and $150 million under the Treaty for the 12 months ending June 30, 2026 and 2025, respectively.
Removed
The Company offers the following types of homeowners coverage: dwelling, liability, personal property, and other coverages.
Added
(2) No individual line of insurance business accounted for more than 5% of total direct premiums written.
Removed
Inflationary trends accelerated to their highest level in decades in 2022, which had a significant impact on the cost of automobile parts and labor as well as medical expenses for bodily injuries, and supply chain and labor shortage issues lengthened the time to repair vehicles. Bodily injury costs were also under pressure from social inflation.
Added
In 2025, the Company invested in and expanded its independent agent network through various distribution partnerships. The Company believes that it compensates its agents above the industry average. Net commissions incurred in 2025 were approximately 15% of net premiums written.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

31 edited+9 added−3 removed178 unchanged
Biggest changeAlthough the Company has consistently paid cash dividends in the past, it may not be able to pay or increase cash dividends in the future. The Company has consistently paid cash dividends since the public offering of its common stock in November 1985 and has consistently increased the dividend per share until 2022.
Biggest changeThe Company has consistently paid cash dividends since the public offering of its common stock in November 1985 and has consistently increased the dividend per share until 2022. As a result of challenging business conditions, the Company reduced the dividend per share during 2022 for the first time since 1985.
Some states impose restrictions or require prior regulatory approval of specific corporate actions, which may adversely affect the Company’s ability to operate, innovate, obtain necessary rate adjustments in a timely manner or grow its business profitably. These regulations provide safeguards for policyholders and are not intended to protect the interests of shareholders.
Some states impose restrictions 21 or require prior regulatory approval of specific corporate actions, which may adversely affect the Company’s ability to operate, innovate, obtain necessary rate adjustments in a timely manner or grow its business profitably. These regulations provide safeguards for policyholders and are not intended to protect the interests of shareholders.
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.
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 deferred tax asset valuation allowance.
Although the Company seeks to mitigate the impact and severity of potential cyber threats through cyber insurance coverage, not every risk or liability can be insured, and for risks that are insurable, the policy limits and terms of coverage reasonably obtainable in the market may not be sufficient to cover all actual losses or liabilities incurred.
Although the Company seeks to mitigate the impact and severity of potential cyber threats through cyber insurance coverage, not every risk 24 or liability can be insured, and for risks that are insurable, the policy limits and terms of coverage reasonably obtainable in the market may not be sufficient to cover all actual losses or liabilities incurred.
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.
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 Stable outlook and A3 with Negative outlook, respectively.
An inability to attract, retain and motivate the necessary employees for the operation and expansion of the Company’s business could hinder its ability to conduct its business activities successfully, develop new products and attract customers. The Company’s success also depends upon the continued contributions of its executive officers, both individually and as a group.
An inability to attract, retain and motivate the necessary employees for the operation and expansion of the Company’s business could hinder its ability to conduct its business activities successfully, develop new products and attract customers. 26 The Company’s success also depends upon the continued contributions of its executive officers, both individually and as a group.
Risks Related to the Company’s Industry The private passenger automobile insurance industry is highly competitive, and the Company may not be able to compete effectively against larger or better-capitalized companies. The Company competes with many property and casualty insurance companies selling private passenger automobile insurance in the states in which the Company operates.
Risks Related to the Company’s Industry The private passenger automobile insurance industry is highly competitive, and the Company may not be able to compete effectively against larger or better-capitalized companies. The Company competes with many property and casualty insurance companies selling private passenger automobile 20 insurance in the states in which the Company operates.
The Company’s expansion plans may adversely affect its future profitability. The Company intends to continue to expand its operations in several of the states in which the Company has operations and may expand into states in which it has not yet begun operations. The intended expansion will necessitate increased expenditures.
The Company’s expansion plans may adversely affect its future profitability. The Company intends to continue to expand its operations in several of the states in which the Company has operations 19 and may expand into states in which it has not yet begun operations. The intended expansion will necessitate increased expenditures.
Techniques used in cyber incidents evolve frequently, may originate from less regulated and remote areas of the world and be difficult to detect and may not be recognized until 23 launched against a target.
Techniques used in cyber incidents evolve frequently, may originate from less regulated and remote areas of the world and be difficult to detect and may not be recognized until launched against a target.
Maintaining compliance with applicable information security and privacy regulations may increase the Company’s operating costs and adversely impact its 24 ability to market products and services to its policyholders.
Maintaining compliance with applicable information security and privacy regulations may increase the Company’s operating costs and adversely impact its ability to market products and services to its policyholders.
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.
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 12.
In addition, from time to time, the Company may support or oppose legislation or other amendments to insurance regulations in California or other states in which it operates.
In addition, from time to time, the Company may support or oppose legislation or other amendments to insurance 22 regulations in California or other states in which it operates.
The insurance laws of most states in which the Company conducts business require insurance companies to file insurance rate schedules and insurance policy forms for review and approval.
Regulation of Insurance Rates and Approval of Policy Forms. The insurance laws of most states in which the Company conducts business require insurance companies to file insurance rate schedules and insurance policy forms for review and approval.
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.
The Company sells its insurance policies primarily through a network of approximately 8,510 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.
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.
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, 2025, the Company generated approximately 85% of its direct automobile insurance premiums written in California.
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. 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.
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. Although the inflation moderated in 2023 through 2025, it has created a heightened level of risk for the Company, the insurance industry and the U.S. economy generally.
The Company's business, financial condition and results of operations could be adversely affected by geopolitical conflicts and related disruptions in the global economy.
The Company's business, financial condition and results of operations could be adversely affected by geopolitical conflicts and related disruptions in the global economy, including the imposition of tariffs.
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.
At December 31, 2025, the Company’s consolidated balance sheet reflected approximately $43 million of goodwill and $7 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.
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 may be adversely affected by changes in the private passenger automobile insurance industry. Approximately 60% of the Company’s direct premiums written for the year ended December 31, 2025 were generated from private passenger automobile insurance policies.
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.
At December 31, 2025, 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.
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.
On February 20, 2025, A.M. Best affirmed the Financial Strength Rating ("FSR") of A (Excellent) and revised the outlook from Stable to Negative for the Company's Insurance Companies. The Company believes that if it is unable to maintain its A.M.
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.
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 changes could have a material adverse effect on the Company’s financial condition and results of operations. The Company’s disclosure controls and procedures may not prevent or detect acts of fraud.
Transactions between the Insurance Companies and their affiliates (including the Company) generally must be disclosed to state regulators, and prior approval of the applicable regulator is required before any material or extraordinary transaction may be consummated.
Transactions between the Insurance Companies and their affiliates (including the Company) generally must be disclosed to state regulators, and prior approval of the applicable regulator is required before any material or extraordinary transaction may be consummated. State regulators may refuse to approve or delay approval of some transactions, which may adversely affect the Company’s ability to innovate or operate efficiently.
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.
Loss and Loss Adjustment Expense Reserves, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" for discussion of significant catastrophe losses related to the Palisades and Eaton wildfires that occurred in January 2025. The Company depends on independent agents who may discontinue sales of its policies at any time.
These laws and regulations may discourage potential acquisition proposals and may delay, deter or prevent a change of control of the Company or the sale by the Company of any of its Insurance Companies, including transactions that some or all of the Company’s shareholders might consider to be desirable.
These laws and regulations may discourage potential acquisition proposals and may delay, deter or prevent a change of control of the Company or the sale by the Company of any of its Insurance Companies, including transactions that some or all of the Company’s shareholders might consider to be desirable. 25 Although the Company has consistently paid cash dividends in the past, it may not be able to pay or increase cash dividends in the future.
The Company cannot predict whether and to what extent new laws and regulations that would affect its business will be adopted, the timing of any such adoption and what effects, if any, they may have on the Company’s business, financial condition, and results of operations. 22 Assessments and other surcharges for guaranty funds, second-injury funds, catastrophe funds, and other mandatory pooling arrangements may reduce the Company’s profitability.
The Company cannot predict whether and to what extent new laws and regulations that would affect its business will be adopted, the timing of any such adoption and what effects, if any, they may have on the Company’s business, financial condition, and results of operations.
Virtually all states require insurers licensed to do business in their state to bear a portion of the loss suffered by some insured parties as the result of impaired or insolvent insurance companies.
Assessments and other surcharges for guaranty funds, second-injury funds, catastrophe funds, and other mandatory pooling arrangements may reduce the Company’s profitability. Virtually all states require insurers licensed to do business in their state to bear a portion of the loss suffered by some insured parties as the result of impaired or insolvent insurance companies.
Risks Related to Technology and Cybersecurity The Company relies on its information technology systems, and those of its service providers, to manage many aspects of its business, and any failure of these systems to function properly or any interruption in their operation could result in a material adverse effect on the Company’s business, financial condition, and results of operations.
In addition, potential litigation involving new claim, coverage, and business practice issues could adversely affect the Company’s business by changing the way policies are priced, extending coverage beyond its underwriting intent, or increasing the size of claims. 23 Risks Related to Technology and Cybersecurity The Company relies on its information technology systems, and those of its service providers, to manage many aspects of its business, and any failure of these systems to function properly or any interruption in their operation could result in a material adverse effect on the Company’s business, financial condition, and results of operations.
If the amounts actually recoverable under the Company’s reinsurance treaties are ultimately determined to be less than the amount it has reported as recoverable, the Company may incur a loss during the period in which that determination is made. 18 The failure of any loss limitation methods employed by the Company could have a material adverse effect on its financial condition or results of operations.
If the amounts actually recoverable under the Company’s reinsurance treaties are ultimately determined to be less than the amount it has reported as recoverable, the Company may incur a loss during the period in which that determination is made. 18 There is uncertainty involved in the collectability of subrogation recoverable.
As a result of challenging business conditions, the Company reduced the dividend per share during 2022 for the first time since 1985. Future cash dividends will depend upon a variety of factors, including the Company’s profitability, financial condition, capital needs, future prospects, and other factors deemed relevant by the Board of Directors.
Future cash dividends will depend upon a variety of factors, including the Company’s profitability, financial condition, capital needs, future prospects, and other factors deemed relevant by the Board of Directors.
Various provisions of the Company’s policies, such as limitations or exclusions from coverage which are intended to limit the Company’s risks, may not be enforceable in the manner the Company intends. In addition, the Company’s policies contain conditions requiring the prompt reporting of claims and the Company’s right to decline coverage in the event of a violation of that condition.
In addition, the Company’s policies contain conditions requiring the prompt reporting of claims and the Company’s right to decline coverage in the event of a violation of that condition.
Removed
State regulators may refuse to approve or delay approval of some transactions, which may adversely affect the Company’s ability to innovate or operate efficiently. 21 Regulation of Insurance Rates and Approval of Policy Forms.
Added
The Company actively pursues subrogation against responsible third parties after paying covered claims to its policyholders. When catastrophe events occur, the total potential amount of subrogation recoverable from third parties can be significant due to the large losses resulting from the catastrophes.
Removed
In addition, potential litigation involving new claim, coverage, and business practice issues could adversely affect the Company’s business by changing the way policies are priced, extending coverage beyond its underwriting intent, or increasing the size of claims.
Added
When the Company is presented with the right opportunity to sell its subrogation rights, the Company may sell such rights to third party investors or financial institutions. Alternatively, the Company may choose to seek subrogation recovery through litigation and/or negotiation with the parties involved.
Removed
The Company’s disclosure controls and procedures may not prevent or detect acts of fraud.
Added
Although the amount of subrogation recoverable from third parties is recorded as an offset against loss and loss adjustment expense reserves, no assurance can be given that the Company will be able to collect the recoverable amount from third parties through litigation and/or negotiation.
Added
In addition, the Company may not be able to find suitable buyers for its subrogation rights or sell such rights for a price equal to or higher than the amount that the Company recorded as subrogation recoverable.
Added
If the amount actually recoverable is ultimately determined to be less than the amount the Company has recorded as subrogation recoverable, the Company may incur a significant loss during the period in which that determination is made, which could have a material and adverse impact on the Company’s financial condition and results of operations. See Note 12.
Added
Loss and Loss Adjustment Expense Reserves, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" for discussion of significant amounts of subrogation recoverable resulting from the Palisades and Eaton wildfires that occurred in January 2025.
Added
The failure of any loss limitation methods employed by the Company could have a material adverse effect on its financial condition or results of operations. Various provisions of the Company’s policies, such as limitations or exclusions from coverage which are intended to limit the Company’s risks, may not be enforceable in the manner the Company intends.
Added
Effective February 4, 2025, the United States announced additional tariffs for goods imported into the United States from Mexico, Canada, and China, which was followed by a series of other tariff-related announcements by the United States and other countries.
Added
Although the Company cannot predict what additional actions may ultimately be taken by the United States or other governments with respect to tariffs or trade relations, such actions could increase the Company's loss costs due to higher repair and replacement costs for insured properties and cause a decline in the value of its investment portfolio due to disruptions in financial markets, which could adversely affect the Company's business, financial condition and results of operations.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeManagement’s Role in Assessing and Managing Material Risks from Cybersecurity Threats The Company's Information Security business unit primarily manages the day-to-day operations of monitoring cybersecurity risks to the Company's information systems, takes prevention, detection, and remediation measures for cybersecurity incidents, makes initial assessment of reported cybersecurity incidents, and reports such incidents to the Company's CEO, Chief Operating Officer (“COO”), CTO, Board and Enterprise Risk Management Committee as well as certain regulatory bodies, as needed.
Biggest changeManagement’s Role in Assessing and Managing Material Risks from Cybersecurity Threats The Company's Information Security business unit primarily manages the day-to-day operations of monitoring cybersecurity risks to the Company's information systems, takes prevention, detection, and remediation measures for cybersecurity incidents, makes initial assessment of reported cybersecurity incidents, and reports such incidents to the 28 Company's CEO, Chief Operating Officer (“COO”), CTO, Board and Enterprise Risk Management Committee as well as certain regulatory bodies, as needed.
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.
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.
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.
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.
Depending on the nature and severity of the reported cybersecurity incidents, the Enterprise Risk Management Committee may recommend activation of the Crisis Management Plan under the Company's Business Continuity Management Program. The Disclosure Committee is informed by the CEO of significant cybersecurity incidents for purposes of determining materiality.
Depending on the nature and severity of the reported cybersecurity incidents, the Enterprise Risk Management Committee may recommend activation of the Crisis Management Plan under the Company's Business Continuity Management Program. The Disclosure Committee is informed by the CEO of significant cybersecurity incidents for purposes of determining materiality. 29
The Enterprise Risk Management Committee oversees cybersecurity risks Company-wide while the Company’s Chief Technology Officer (“CTO”), a member of the Enterprise Risk Management Committee, oversees the Information Security business unit's cybersecurity management programs and activities.
The Enterprise Risk Management Committee oversees cybersecurity risks Company-wide while the Company’s Chief Technology Officer (“CTO”), a member of the Enterprise Risk Management Committee, oversees the Information Security 27 business unit's cybersecurity management programs and activities.

Item 2. Properties

Properties — owned and leased real estate

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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.
Biggest changeThe 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. Most 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.
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.
Location Purpose Size in Square Feet Percent Leased to Third Parties at December 31, 2025 Brea, CA Home office and I.T. facilities 80,000 — % Los Angeles, CA Executive offices 41,000 5 % The Company leases additional office space for operations. In addition, the Company owns 5.9 acres of land in Rancho Cucamonga, California.
Removed
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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed6 unchanged
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.
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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 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.
Biggest changeItem 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 and the New York Stock Exchange Texas (trading symbol: MCY). The closing price of the Company’s common stock on February 12, 2026 was $94.76.
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.
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 (S&P 500 Property & Casualty Insurance Index) over the last five years.
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.
Holders As of February 12, 2026, there were approximately 133 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, 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.
As of December 31, 2025, the Insurance Companies are permitted to pay in 2026, without obtaining DOI approval for extraordinary dividends, $448 million in dividends to Mercury General, of which $422 million may be paid by the California Companies.
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.
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.
Removed
In past years, the Company used the Custom Peer Group as its industry peer group for purposes of the stock performance graph below.
Added
The graph assumes an investment of $100 on December 31, 2020 in each of the Company’s Common Stock, the S&P 500 Index and the industry peer group and the reinvestment of all dividends. 2020 2021 2022 2023 2024 2025 Mercury General $ 100.00 $ 106.18 $ 71.54 $ 81.22 $ 148.04 $ 213.25 S&P 500 Property & Casualty Insurance Index 100.00 119.28 141.79 157.12 212.86 234.32 S&P 500 Index 100.00 128.71 105.40 133.10 166.40 196.16 Recent Sales of Unregistered Securities None.
Removed
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.
Removed
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.
Removed
The 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.

Item 7. Management's Discussion & Analysis

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

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Biggest changeInvestments 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.
Biggest changeIncome tax expense of $122.6 million on pre-tax income of $663.6 million, including tax-exempt investment income of $99.2 million, resulted in an effective tax rate of 18.5%, below the statutory tax rate of 21%, for 2025, and income tax expense of $106.9 million on pre-tax income of $574.9 million, including tax-exempt investment income of $83.3 million, resulted in an effective tax rate of 18.6% for 2024. 41 Investments The following table presents the investment results of the Company: Year Ended December 31, 2025 2024 (Amounts in thousands) Average invested assets at cost (1) $ 5,968,575 $ 5,683,973 Net investment income (2)(3) Before income taxes $ 328,701 $ 279,989 After income taxes $ 276,214 $ 235,419 Average annual yield on investments (2) Before income taxes 4.7 % 4.5 % After income taxes 4.0 % 3.8 % Net realized investment gains $ 131,368 $ 88,671 __________ (1) Fixed maturities and short-term bonds at amortized cost; equities and other short-term investments at cost.
Average annual yield on investments does not include interest income earned on cash. (3) Net investment income before and after income taxes increased primarily due to higher average yield combined with higher average invested assets and cash.
Average annual yield on investments does not include interest income earned on cash. (3) Net investment income before and after income taxes increased, primarily due to higher average invested assets and cash combined with higher average yield.
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.
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.
Business—Regulation." In late 2024, as part of the insurance commissioner’s “Sustainable Insurance Strategy,” the California Department of Insurance issued two regulations that may impact how insurers price and write certain of their California property insurance policies: one allowing insurers to incorporate catastrophe modeling into rate-making with a requirement for them to align their share of insured properties in distressed wildfire-prone areas of the state to at least 85% of their state-wide market share, which may be increased by 5% per year, if necessary, until that level is reached; and the other allowing insurers to incorporate reinsurance costs into rate-making for certain specific catastrophe perils and wildfire exposures when meeting the same requirement governing the use of catastrophe modeling.
Business—Regulation." In late 2024, as part of the California insurance commissioner’s “Sustainable Insurance Strategy,” the California DOI issued two regulations that may impact how insurers price and write certain of their California property insurance policies: one allowing insurers to incorporate catastrophe modeling into rate-making with a requirement for them to align their share of insured properties in distressed wildfire-prone areas of the state to at least 85% of their state-wide market share, which may be increased by 5% per year, if necessary, until that level is reached; and the other allowing insurers to incorporate reinsurance costs into rate-making for certain specific catastrophe perils and wildfire exposures when meeting the same requirement governing the use of catastrophe modeling.
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.
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.
Financial Statements and Supplementary Data." The Company also establishes accruals for estimated liabilities for non-insurance claims related lawsuits, regulatory actions, and other contingencies when the Company believes a loss is probable and is able to estimate its potential exposure.
Financial Statements and Supplementary Data." The Company also establishes accruals for estimated liabilities for non-insurance claims related lawsuits, regulatory 35 actions, and other contingencies when the Company believes a loss is probable and is able to estimate its potential exposure.
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.
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.
Net premiums earned, a GAAP measure, represents the portion of net premiums written that is recognized as revenue in the financial statements for the periods presented and earned on a pro-rata basis over the term of the policies.
Net premiums earned, a GAAP measure, represents the portion of net premiums written that is recognized as revenue in the financial statements for the periods presented, earned on a pro-rata basis over the term of the policies.
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 38 or a weekend.
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 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, 2025. 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.
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.
Debt The Company's debt consists of the following: December 31, Lender Interest Rate Expiration 2025 2024 (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, 2024.
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, 2025.
The 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 2024, 2023 and 2022 accident years, respectively; however, the variation could be more or less than these amounts.
The 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 2025, 2024 and 2023 accident years, respectively; however, the variation could be more or less than these amounts.
Based on the uncertainty surrounding the financial condition of these insurers, it is possible that there will be additional downgrades to below investment grade ratings by the rating agencies in the future, and such downgrades could impact the estimated fair value of those municipal bonds.
Based on the uncertainty surrounding the financial condition of these insurers, it is possible that there will be future downgrades to below investment grade ratings by the rating agencies in the future, and such downgrades could impact the estimated fair value of municipal bonds.
The Company contributed $150 million of the total amount drawn to the surplus of its consolidated insurance subsidiaries, and used the remainder for general corporate purposes. (3) The unamortized discount and debt issuance costs are associated with the publicly traded $375 million senior unsecured notes.
The Company contributed $150 million of the total amount drawn to the surplus of its consolidated insurance subsidiaries in 2023, and used the remainder for general corporate purposes. (3) The unamortized discount and debt issuance costs are associated with the publicly traded $375 million senior unsecured notes.
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.
The unamortized debt issuance cost of approximately $0.4 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.
The claim count development method analyzes historical claim count development to estimate future incurred claim count development for current claims. The Company applies these development factors against current claim counts by accident period to calculate ultimate expected claim counts. 37 The Company analyzes catastrophe losses separately from non-catastrophe losses.
The claim count development method analyzes historical claim count development to estimate future 36 incurred claim count development for current claims. The Company applies these development factors against current claim counts by accident period to calculate ultimate expected claim counts. The Company analyzes catastrophe losses separately from non-catastrophe losses.
These forward-looking statements involve significant risks and uncertainties (some of which are beyond the control of the Company) and are subject to change based upon various factors, including but not limited to the following risks and uncertainties: changes in the demand for the Company’s insurance products, inflation and general economic conditions, including general market risks associated with the Company’s investment portfolio; the accuracy and adequacy of the Company’s pricing methodologies; catastrophes in the markets served by the Company; uncertainties related to estimates, assumptions and projections generally; the possibility that actual loss experience may vary adversely from the actuarial estimates made to determine the Company’s loss reserves in general; the Company’s ability to obtain and the timing of the approval of premium rate changes for insurance policies issued in states where the Company operates; legislation adverse to the automobile insurance industry or business generally that may be enacted in the states where the Company operates; the Company’s success in managing its business in non-California states; the presence of competitors with greater financial resources and the impact of competitive pricing and marketing efforts; the Company's ability to successfully allocate the resources used in the states with reduced or exited operations to its operations in other states; changes in driving patterns and loss trends; acts of war and terrorist activities; pandemics, epidemics, widespread health emergencies, or outbreaks of infectious diseases; court decisions and trends in litigation and health care and auto repair costs; and legal, cybersecurity, regulatory and litigation risks.
These forward-looking statements involve significant risks and uncertainties (some of which are beyond the control of the Company) and are subject to change based upon various factors, including but not limited to the following risks and uncertainties: changes in the demand for the Company’s insurance products, inflation and general economic conditions, including general market risks associated with the Company’s investment portfolio; the accuracy and adequacy of the Company’s pricing methodologies; catastrophes in the markets served by the Company; uncertainties related to estimates, assumptions and projections generally; the possibility that actual loss experience may vary adversely from the actuarial estimates made to determine the Company’s loss reserves in general, including subrogation recovery estimates; the Company’s ability to obtain and the timing of the approval of premium rate changes for insurance policies issued in states where the Company operates; legislation adverse to the automobile insurance industry or business generally that may be enacted in the states where the Company operates; the Company’s success in managing its business in non-California states; the presence of competitors with greater financial resources and the impact of competitive pricing and marketing efforts; the Company's ability to successfully allocate the resources used in the states with reduced or exited operations to its operations in other states; changes in driving patterns and loss trends; acts of war and terrorist activities; effects of changing climate conditions; pandemics, epidemics, widespread health emergencies, or outbreaks of infectious diseases; court decisions and trends in litigation and health care and auto repair costs; changes in global trade policies, including trade barriers or restrictions; and legal, cybersecurity, regulatory and litigation risks.
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.
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, 2024 for a discussion of changes in its results of operations from the year ended December 31, 2023 to the year ended December 31, 2024. LIQUIDITY AND CAPITAL RESOURCES A.
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 ORSA is intended to be used by state insurance regulators to evaluate the risk exposure and quality of the risk management processes 51 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 2025.
During the course of and at the conclusion of the examinations, the examining DOI generally reports findings to the Company. No material findings have been communicated to the Company on the Texas market conduct examination noted above. 52
During the course of and at the conclusion of the examinations, the examining DOI generally reports findings to the Company. No material findings have been communicated to the Company in the Texas market conduct examination reports noted above. 52
The principal uses of funds for the Insurance Companies are the payment of claims and related expenses, operating expenses, dividends to Mercury General, and the purchase of investments. B. Cash Flows The Company has generated positive cash flow from operations since the public offering of its common stock in November 1985.
The principal uses of funds for the Insurance Companies are the payment of claims and related expenses, operating expenses, dividends to Mercury General, and the purchase of investments. B. Cash Flows The Company has generated positive cash flow from operations in each full year since the public offering of its common stock in November 1985.
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.
The Company periodically monitors the RBC level of each of the Insurance Companies. As of December 31, 2025, 2024 and 2023, each of the Insurance Companies exceeded the minimum required RBC level, as determined by the NAIC and adopted by the state insurance regulators.
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.
IBNR includes estimates, based upon past experience, of ultimate developed 39 costs, which may differ from case estimates, unreported claims that occurred on or prior to December 31, 2025 and 2024, and estimated future payments for reopened claims.
The 2024 loss ratio was negatively impacted by a total of approximately $268 million of catastrophe losses, excluding unfavorable development of approximately $9 million on prior years' catastrophe losses, primarily due to 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.
Financial Statements and Supplementary Data." The 2024 loss ratio was negatively impacted by a total of approximately $268 million of catastrophe losses, excluding unfavorable development of approximately $9 million on prior years' catastrophe losses, primarily due to 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.
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.
None of the Insurance Companies’ RBC ratios were less than 350% of the authorized control level RBC as of December 31, 2025, 2024 and 2023. Generally, an RBC ratio of 200% or less would require some form of regulatory or company action.
The underlying factors and assumptions that serve as the basis for preparing the loss reserve estimate include paid and incurred loss development factors, expected average costs per claim, inflation trends, expected loss ratios, industry data, and other relevant information.
The underlying factors and assumptions that serve as the basis for preparing the loss reserve estimate include paid and incurred loss development factors, expected average costs per claim, inflation trends, expected loss ratios, industry data, and other relevant information such as subrogation recoverable.
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.
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, 2025, the accident years that are most likely to develop are the 2023 through 2025 accident years; however, it is possible that older accident years could develop as well.
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.
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) 473 872 Total $ 574,527 $ 574,128 __________ (1) On March 8, 2017, the Company completed a public debt offering issuing $375 million of senior notes.
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.
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 $448 million in 2026 to Mercury General.
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.
As of December 31, 2025, Mercury General had approximately $114 million in investments and cash that could be utilized to satisfy its direct holding company obligations. 43 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 modified duration of the mortgage-backed securities portfolio reflecting anticipated early calls was 4.9 years and 8.7 years at December 31, 2024 and 2023, respectively. Corporate Securities At December 31, 2024 and 2023, respectively, the company had corporate securities of $841.7 million and $599.6 million, or 17.1% and 13.9% of its fixed maturity securities portfolio, at fair value.
The modified duration of the mortgage-backed securities portfolio reflecting anticipated early calls was 3.4 years and 4.9 years at December 31, 2025 and 2024, respectively. Corporate Securities At December 31, 2025 and 2024, respectively, the company had corporate securities of $751.6 million and $841.7 million, or 13.8% and 17.1% of its fixed maturity securities portfolio, at fair value.
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.
With combined cash and short-term investments of $1,652.6 million at December 31, 2025 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 future liquidity requirements without the forced sale of investments. Investment maturities are also available to meet the Company’s liquidity needs.
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.
The average annual net cash provided by operating activities for the past 10 years was approximately $557 million, and cash generated from operations was sufficient to meet the liquidity needs over this period. The following table presents the estimated fair value of fixed maturity securities at December 31, 2025 by contractual maturity in the next five years.
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.
The Company’s loss ratio was affected by favorable development of approximately $92 million and unfavorable development of approximately $25 million on prior accident years’ loss and loss adjustment expense reserves for the years ended December 31, 2025 and 2024, 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 2024, the Company reported unfavorable development of approximately $25 million on the 2023 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 2025, the Company reported favorable development of approximately $92 million on the 2024 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, 2024, 99.4% 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, 2025, 89.9% of short-term investments consisted of highly rated short-duration securities redeemable on a daily or weekly basis.
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.
Mortgage-Backed Securities At December 31, 2025 and 2024, respectively, the mortgage-backed securities portfolio of $297.4 million and $259.4 million, or 5.5% and 5.3% of the Company's fixed maturity securities portfolio, at fair value, was categorized as loans to "prime" residential and commercial real estate borrowers.
The 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.
The following table presents the Insurance Companies’ loss, expense, and combined ratios determined in accordance with GAAP: Year Ended December 31, 2025 2024 Loss ratio 72.0 % 72.6 % Expense ratio 24.3 % 23.4 % Combined ratio 96.3 % 96.0 % Loss ratio is calculated by dividing losses and loss adjustment expenses by net premiums earned.
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.
The Company’s common stock allocation is intended to enhance the return of and provide diversification for the total portfolio. At December 31, 2025, 12.4% of the total investment portfolio, at fair value, was held in equity securities, compared to 14.5% at December 31, 2024.
The commissioner has also implemented changes to the California FAIR Plan, expanding coverage offerings and changing the assessment and recoupment processes in order to enhance market stability: the FAIR Plan’s member insurers may now request the insurance commissioner’s prior approval to collect temporary supplemental fees from their own policyholders in order to recoup up to 50% of amounts assessed up to $2 billion in aggregate assessments on the industry, and 100% of all amounts assessed over that $2 billion threshold.
The California insurance commissioner has also implemented changes to the California FAIR Plan, expanding coverage offerings and changing the assessment and recoupment processes in order to enhance market stability: the FAIR Plan’s member insurers may now request the California insurance commissioner’s prior approval to collect temporary supplemental fees from their own policyholders in order to recoup up to 50% of amounts assessed up to $1 billion in aggregate assessments in the industry and 100% of all amounts assessed over that $1 billion threshold for each of personal and commercial lines of insurance business, and 100% of all amounts assessed over $2 billion in aggregate assessments in the industry for the combined personal and commercial lines of insurance business.
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.
Equity Securities Equity holdings of $812.8 million and $879.2 million, at fair value, as of December 31, 2025 and 2024, 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.
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.
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. 33 2025 Financial Performance Summary The Company’s net income for the year ended December 31, 2025 was $541.1 million, or $9.77 per diluted share, compared to $468.0 million, or $8.45 per diluted share, for the same period in 2024.
The net gains due to changes in fair value of the Company’s equity portfolio were $8.4 million and $45.0 million in 2024 and 2023, respectively. The primary cause for the increases in fair value of the Company's equity securities in 2024 and 2023 was the overall improvement in equity markets.
The net gains due to changes in fair value of the Company’s 48 equity portfolio were $0.2 million and $8.4 million in 2025 and 2024, respectively. The primary cause for the increases in fair value of the Company's equity securities in 2025 and 2024 was the overall improvement in equity markets.
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").
Discussion of Losses and Loss Reserves and Prior Period Loss Development At December 31, 2025 and 2024, the Company recorded its point estimate of approximately $3.63 billion and $3.15 billion ($3.60 billion and $3.12 billion, net of reinsurance), respectively, in loss and loss adjustment expense reserves, which included approximately $2.12 billion and $1.92 billion ($2.12 billion and $1.92 billion, net of reinsurance), respectively, of incurred-but-not-reported liabilities ("IBNR").
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.
Amounts differ from the balances presented on the consolidated balance sheet as of December 31, 2025 because the debt amounts above include interest and exclude the discount and issuance costs of the debt.
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.
The Company had holdings of $11.2 million and $16.0 million, at fair value, in commercial mortgage-backed securities at December 31, 2025 and 2024, respectively. The weighted-average rating of the entire mortgage backed securities portfolio was AA+ at December 31, 2025 and 2024.
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 weighted-average rating was A at December 31, 2025 and 2024. The modified duration reflecting anticipated early calls was 2.9 years and 3.0 years at December 31, 2025 and 2024, respectively.
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.
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 2025: • 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.
(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.
(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 2036. Lease obligations include $8.1 million in lease commitments that have not yet commenced as of December 31, 2025. See Note 7.
The Company also engages independent actuarial consultants to review the Company’s loss reserves and to provide the annual actuarial opinions required under state statutory accounting requirements. The Company analyzes loss reserves quarterly primarily using the incurred loss, paid loss, average severity coupled with the claim count development methods, and the generalized linear model ("GLM") described below.
The Company also engages independent actuarial consultants to review the Company’s loss reserves and to provide the annual actuarial opinions required under state statutory accounting requirements. The Company analyzes loss reserves quarterly primarily using the incurred loss method, paid loss method, and average severity method coupled with the claim count development method, as described below.
The modified duration reflecting anticipated early calls was 4.9 years and 3.5 years at December 31, 2024 and 2023, respectively. 48 Other Asset-Backed Securities The Company had other asset-backed securities of $105.1 million and $96.2 million, which represented 2.1% and 2.2% of its fixed maturity securities portfolio, at fair value, at December 31, 2024 and 2023, respectively.
The modified duration reflecting anticipated early calls was 5.9 years and 4.9 years at December 31, 2025 and 2024, respectively. Other Asset-Backed Securities The Company had other asset-backed securities of $98.5 million and $105.1 million, which represented 1.8% and 2.1% of its fixed maturity securities portfolio, at fair value, at December 31, 2025 and 2024, respectively.
However, the Company is unable to determine which, if any, of the factors actually impact the number of claims reported and, if so, by what magnitude. At December 31, 2024, there were 19,018 California automobile BI claims reported for the 2024 accident year and the Company estimates that these are expected to ultimately grow by approximately 11.7%.
However, the Company is unable to determine which, if any, of the factors actually impact the number of claims reported and, if so, by what magnitude. At December 31, 2025, there were 19,506 California automobile BI claims reported for the 2025 accident year and the Company estimates that these are expected to ultimately grow by approximately 10.5%.
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.
As of February 17, 2026, a total of $200 million was drawn under this facility on a three-month revolving basis at an annual interest rate of approximately 5.09%, with $50 million available to be drawn.
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.
Based on the combined surplus of all the Insurance Companies of $2.39 billion at December 31, 2025 and net premiums written in 2025 of $5.7 billion, the ratio of premiums written to surplus was 2.39 to 1. Insurance companies are required to file an Own Risk and Solvency Assessment ("ORSA") with the insurance regulators in their domiciliary states.
Average invested assets at cost are based on the monthly amortized cost of the invested assets for each period. (2) Net investment income includes approximately $25.5 million and $14.5 million of interest income earned on cash (approximately $20.2 million and $11.5 million after tax) for the years ended December 31, 2024 and 2023, respectively.
Average invested assets at cost are based on the monthly amortized cost of the invested assets for each period. (2) Net investment income includes approximately $50.7 million and $25.5 million of interest income earned on cash (approximately $40.1 million and $20.2 million after tax) for the years ended December 31, 2025 and 2024, respectively.
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 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%. However, actual development may be more or less than the expected range.
The weighted-average rating was A- at December 31, 2024 and 2023. The modified duration reflecting anticipated early calls was 1.4 years and 2.2 years at December 31, 2024 and 2023, respectively.
The weighted-average rating was A- at December 31, 2025 and 2024. The modified duration reflecting anticipated early calls was 0.9 years and 1.4 years at December 31, 2025 and 2024, respectively.
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.
Included in net income was $328.7 million of pre-tax net investment income that was generated during 2025 on a portfolio of $6.6 billion, at fair value, at December 31, 2025, compared to $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.
The California homeowners line of insurance business represented approximately 16% of the Company's total net premiums earned in 2024. • In April 2024, the California DOI approved a 14.9% rate increase on the California commercial automobile line of insurance business. This rate increase became effective in July 2024.
This rate increase is expected to become effective in July 2026. The California homeowners line of insurance business represented approximately 15% of the Company's total net premiums earned in 2025. • In April 2024, the California DOI approved a 14.9% rate increase on the California commercial automobile line of insurance business. This rate increase became effective in July 2024.
Loss frequency trends are affected by many factors such as fuel prices, the economy, the prevalence of distracted driving, collision avoidance and other technology in vehicles, and stay-at-home orders issued by state and local governments due to the pandemic. • Underwriting Cycle and Competition —The property and casualty insurance industry is highly cyclical, with alternating hard and soft market conditions.
Loss frequency trends are affected by many factors such as fuel prices, the economy, the prevalence of distracted driving, and collision avoidance and other technology in vehicles. • Underwriting Cycle and Competition —The property and casualty insurance industry is highly cyclical, with alternating hard and soft market conditions.
(2) The increases in fair value of fixed maturity securities in 2024 and 2023 were primarily due to decreases in certain market interest rates associated with the Company's fixed maturity securities. (3) The increases in fair value of equity securities in 2024 and 2023 were primarily due to the overall improvement in equity markets associated with the Company's equity securities.
(2) The increases in fair value of fixed maturity securities in 2025 and 2024 resulted primarily from decreases in certain market interest rates associated with the Company's fixed maturity securities. (3) The increases in fair value of equity securities in 2025 and 2024 resulted primarily from the overall improvement in equity markets.
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.
The following table presents the typical cumulative 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 39% 12% BI claims closed one year after the accident year reported 79% 54% BI claims closed two years after the accident year reported 93% 79% BI claims closed three years after the accident year reported 97% 89% BI claims closed in the accident year reported are generally the smaller and less complex claims that settle for approximately $11,000 to $12,000 on average, whereas the total average settlement, once all claims are closed for a particular 37 accident year, is approximately $29,000 to $40,000.
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.
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 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.
The decrease in the loss ratio was primarily due to rate increases in the California automobile and homeowners lines of insurance business and a decrease in loss frequency in the California private passenger automobile line of insurance business, partially offset by an increase in loss severity in the California private passenger automobile line of insurance business and an increase in ceded premiums earned due to reinstatement premiums resulting from the Palisades and Eaton wildfires.
Collateralized Loan Obligations At December 31, 2024 and 2023, respectively, the Company had collateralized loan obligations of $626.3 million and $484.9 million, or 12.7% and 11.2% of its fixed maturity securities portfolio, at fair value. The weighted-average rating was AA- at December 31, 2024 and 2023.
Collateralized Loan Obligations At December 31, 2025 and 2024, respectively, the Company had collateralized loan obligations of $722.8 million and $626.3 million, or 13.3% and 12.7% of its fixed maturity securities portfolio, at fair value. The weighted-average rating was AA- at December 31, 2025 and 2024.
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.
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 60% of the $6.0 billion of the Company’s direct premiums written in 2025, and approximately 86% of the private passenger automobile premiums were written in California.
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.
Financial Statements and Supplementary Data." Capital Expenditures The Company's capital expenditures were approximately $58.4 million, $46.1 million and $36.8 million for 2025, 2024 and 2023, respectively, and they were primarily related to improving the Company's information technology infrastructure.
The Company believes that its marketing efforts, combined with its ability to maintain relatively low prices and a strong reputation, make its insurance products competitive in California and in other states. The Company believes its thorough underwriting process gives it an advantage over its competitors. The Company’s agent relationships and underwriting and claims processes are its most important competitive advantages.
The Company believes that its marketing efforts and broad independent agent distribution network, combined with its ability to maintain relatively low prices and a strong reputation, make its insurance products competitive in California and in other states. The Company believes its thorough underwriting process gives it an advantage over its competitors.
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.
Also included in net income were pre-tax net realized investment gains of $131.4 million and $88.7 million in 2025 and 2024, respectively, and pre-tax catastrophe losses, net of reinsurance and reinstatement premiums earned, of approximately $608.6 million and $277.0 million in 2025 and 2024, respectively.
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.
These rate increases became effective in February 2024. The private passenger automobile line of insurance business of MIC and CAIC represented approximately 49% and 6%, respectively, of the Company's total net premiums earned in 2025. • In March 2024, the California DOI approved a 6.99% rate increase on the California homeowners line of insurance business.
In March 2024, the California DOI approved a 6.99% rate increase on the California homeowners line of insurance business. This rate increase became effective in May 2024. In January 2025, the California DOI approved a 12% rate increase on the California homeowners line of insurance business. This rate increase is expected to become effective in March 2025.
This rate increase became effective in May 2024. In January 2025, the California DOI approved a 12% rate increase on the California homeowners line of insurance business. This rate increase became effective in March 2025. In addition, in December 2025, the California DOI approved a 6.9% rate increase on the California homeowners line of insurance business.
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.
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 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.
The following is a reconciliation of total net premiums earned to net premiums written: Year Ended December 31, 2025 2024 (Amounts in thousands) Net premiums earned $ 5,505,613 $ 5,075,456 Change in net unearned premiums 216,165 302,854 Net premiums written $ 5,721,778 $ 5,378,310 40 Expenses Loss and expense ratios are used to interpret the underwriting experience of property and casualty insurance companies.
At December 31, 2023, fixed maturity holdings rated below investment grade and non-rated bonds totaled $6.4 million and $15.1 million, respectively, at fair value, and represented 0.1% and 0.3%, respectively, of total fixed maturity securities.
At December 31, 2025, fixed maturity holdings rated below investment grade and non-rated bonds totaled $10.1 million and $50.6 million, respectively, at fair value, and represented 0.2% and 0.9%, respectively, of total fixed maturity securities.
The increases in net premiums earned and written were primarily due to rate increases in the California automobile and homeowners lines of insurance business and an increase in the number of policies written in the California private passenger automobile and homeowners lines of insurance business.
The increases in net premiums earned and net premiums written were primarily due to rate increases in the California automobile and homeowners lines of insurance business combined with increases in the number of policies written in the California private passenger automobile and homeowners lines of insurance business, partially offset by increases in ceded premiums earned and ceded premiums written, respectively.
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.
Net Income (Loss) Year Ended December 31, 2025 2024 (Amounts in thousands, except per share data) Net income $ 541,094 $ 467,953 Basic average shares outstanding 55,389 55,373 Diluted average shares outstanding 55,389 55,377 Basic Per Share Data: Net income $ 9.77 $ 8.45 Net realized investment gains, net of tax $ 1.87 $ 1.27 Diluted Per Share Data: Net income $ 9.77 $ 8.45 Net realized investment gains, net of tax $ 1.87 $ 1.26 Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 See "Item 7.
In addition, the Company experienced unfavorable development of approximately $9 million on prior years' catastrophe losses in 2024. 40 RESULTS OF OPERATIONS Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 Revenues Net premiums earned and net premiums written in 2024 increased 18.7% and 20.5%, respectively, from 2023.
In addition, the Company experienced favorable development of approximately $23 million on prior years' catastrophe losses in 2025. RESULTS OF OPERATIONS Year Ended December 31, 2025 Compared to Year Ended December 31, 2024 Revenues Net premiums earned and net premiums written in 2025 increased 8.5% and 6.4%, respectively, from 2024.
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.
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.
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.
The Company's debt to total capital ratio was 19.2% at December 31, 2025, resulting in a 12.5 basis point commitment fee on any undrawn portion of the credit facility.

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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 changeTaxable 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.
Biggest changeTaxable fixed maturity securities represented 47.2% of the Company’s fixed maturity portfolio at December 31, 2025. 0.01% of the Company’s taxable fixed maturity securities, representing 0.01% of its total fixed maturity portfolio, were rated below investment grade at December 31, 2025.
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.
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, 2025, 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, 2024.
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.
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, 2025, the Company’s primary objective for common equity investments was current income.
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.
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, 2025 and 2024: December 31, 2025 2024 (Amounts in thousands, except Average Beta) Average Beta 0.84 0.90 Hypothetical reduction of 25% in the overall value of the stock market $ 142,205 $ 166,252 Hypothetical reduction of 50% in the overall value of the stock market $ 284,410 $ 332,504 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, 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.
The fixed maturity portfolio at December 31, 2025, which represented 82.5% of total investments at December 31, 2025, at fair value, is subject to interest rate risk. As market interest rates decrease, the value of the portfolio increases and vice versa.
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 modified duration of the overall fixed maturity securities portfolio reflecting anticipated early calls was 4.4 years at December 31, 2025. 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, 2025 would decrease by $251.0 million and $502.1 million, respectively.
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.
The fair value of the equity investments consisted of $679.6 million in common stocks, $38.8 million in non-redeemable preferred stocks, and $94.4 million in private equity funds. Common stocks are typically valued for future economic prospects as 53 perceived by the market. Common stocks represented 10.3% of total investments at fair value at December 31, 2025.
The 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.
The following table presents municipal securities by state in descending order of holdings at fair value at December 31, 2025: States Fair Value Average Rating (Amounts in thousands) Florida $ 395,322 A+ California 337,542 AA- Texas 326,942 AA New York 271,853 AA Pennsylvania 242,251 A+ Other states 1,964,563 AA- Total $ 3,538,473 At December 31, 2025, the municipal securities portfolio was broadly diversified among the states and the largest holdings were in populous states such as Florida and California.

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