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Inflationary pressures push Mercury General to large Q2 loss

3rd August 2022 - Author: Matt Sheehan

Mercury General has posted a loss of $210.7 million for the second quarter of 2022, compared with a positive result of $109.2 million for the same period last year.

The loss comes as a result of inflationary pressures and $241.9 million of net realised investment losses that weighed on revenues, versus investment gains of $58.8 million last year.

Mercury General’s operating result likewise fell to a loss of $19.6 million for Q2 this year, down from income of $62.7 million for the same period in 2021.

Catastrophe losses declined from $25.0 million to $21.0 million during this time, but the company’s combined ratio increased significantly from 94.9% to 106.6% due to inflated claims costs across business lines.

Looking at the first six months of the year, catastrophe losses totalled approximately $40 million, with no reinsurance benefits used for these losses, resulting primarily from winter storms, rainstorms and hail in Texas and winter storms in California.

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Net premiums written in Q2 increased by 6.2% from $957.3 million last year to $1,017.0 million this year.

Net investment income before taxes likewise increased from $31.0 million to $38.6 million.

Mercury General noted that its results for the quarter had been impacted by inflationary trends that have accelerated to their highest level in decade.

This has had a significant impact on the cost of auto parts and labor as well as medical expenses for bodily injuries, and supply chain and labor shortage issues have lengthened the time to repair vehicles. Bodily injury costs are also under pressure from social inflation.

“These factors have increased losses and loss adjustment expenses for the insured events of the current accident year for the six months ended June 30, 2022 compared to the corresponding period in 2021,” the company explained.

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