Mercury General Corporation, a property and casualty insurance provider based in Los Angeles, California, has released its financial results for the first quarter of 2025, revealing a net loss for the period as a result of significant losses from the January wildfires in California.
The first quarter’s combined ratio surged to 119.2%, up from 100.9% in Q1 2024, marking a sharp increase of 18.3 percentage points.
The bulk of the firm’s $447 million catastrophe losses, net of reinsurance, stemmed from the extreme wind-driven wildfires in Southern California, including the Palisades and Eaton fires.
The company explains that its current estimate of gross catastrophe losses and LAE from the January 2025 Southern California wildfires before reinsurance, excluding its share of FAIR Plan losses and estimated subrogation recoveries, is approximately $2.150 billion, although the firm offset approximately $525 million of estimated subrogation recovery against these gross catastrophe losses, and ceded approximately $1.294 billion of the gross catastrophe losses to its reinsurers.
With Mercury’s catastrophe reinsurance programme absorbing a substantial portion of these losses, the company reported $331 million in net catastrophe losses from the event.
These figures were partially offset by favourable prior-year reserve development, which amounted to approximately $51 million for Q1 2025. Notably, these prior-year adjustments were largely attributed to lower-than-expected losses in the automobile and homeowners segments.
As a result of these losses, Mercury General reported a net loss of $108.3 million for the first quarter of 2025, a significant downturn from the $73.5 million net income reported in Q1 2024.
Additionally, the company’s operating income turned negative, recording a loss of $126.8 million, compared to a gain of $43.3 million in the same quarter last year.
However, for the quarter, the company reported net premiums earned of $1.283 billion, a 10% increase from the $1.167 billion earned in Q1 2024, showcasing strong growth.
The company’s net premiums written in the first quarter rose by 2.3%, amounting to $1.314 billion, compared to $1.285 billion during the same period last year.
The increase in net premiums written was partially driven by a $76 million increase in ceded reinsurance premiums. This was due to the company fully utilising its reinsurance treaty and reinstating catastrophe reinsurance coverage following the Southern California wildfires in January 2025.
As mentioned, Mercury General saw a 10% increase in net premiums earned for the quarter, reflecting solid premium growth. Within its casualty segment, the company’s policies performed well, particularly in the automobile and homeowners lines.
Mercury General’s investment performance for Q1 2025 showed improvement, with net investment income increasing to $81.5 million before tax, compared to $65.0 million in the first quarter of 2024.
The company also saw a rise in its average yield on investments, with a pre-tax yield of 4.9%, up from 4.4% in the previous year.
Net realised investment gains for the quarter were lower than in the previous year, coming in at $18.4 million compared to $30.2 million in Q1 2024.
Despite the challenges faced in the first quarter, Mercury’s Board of Directors declared a quarterly dividend of $0.3175 per share, which will be paid on June 26, 2025, to shareholders of record on June 12, 2025.
