Mercury General Corporation

Mercury General said fourth-quarter 2024 after-tax operating income was $98 million, the highest in company history. The quarter’s combined ratio was 91.4%, or 88.3% excluding catastrophe losses; full-year 2024 combined ratio was 96%, or 90.5% excluding catastrophe losses. Catastrophe losses were $41 million in Q4 and added 3 points to the full-year combined ratio, while investment income after tax was $61.5 million in Q4, up 15% year over year and 18% for the full year. Net premiums written increased 16% to $1.3 billion in Q4 and 20.5% to $5.4 billion for the full year. For 2025, management said investment income should be near 2024 levels, core earnings should generate capital, and homeowners rate actions will continue; a 12% California homeowners rate increase was approved and expected to take effect at the end of March. For the January wildfires, the company estimated gross losses of $1.6 billion to $2 billion before its share of FAIR Plan losses, pretax net catastrophe losses of $155 million to $325 million, reinstatement premium of $80 million to $101 million, and an after-tax statutory surplus impact in Q1 of $5 million to $295 million.

Gabriel Tirador emphasized the quarter as a record performance while framing the wildfire event as both a human tragedy and a material 2025 capital event. He said the company’s core underwriting and investment earnings should help rebuild surplus, and he expects the premium-to-surplus ratio to work back down over time as earnings accumulate. He also said California regulators appear to understand the need for sustainable rate action, including the ability to reflect reinsurance costs and use models.

Ted Stalick highlighted the hard numbers behind the quarter: $41 million of catastrophe losses, a 91.4% combined ratio, $61.5 million of after-tax investment income, and net premiums written of $1.3 billion. He said investment balances were up 16% in the quarter and 12% for the year, supporting the 15% and 18% growth in after-tax investment income. On the wildfire side, he said gross losses are estimated at $1.6 billion to $2 billion, with $80 million to $101 million of reinstatement premium excluded from that range and charged across Q1 and Q2 2025; he also noted over $1 billion of cash on hand earning 4.35% and that $531 million had already been received from reinsurers against $1 billion billed.

Analysts focused on the wildfire loss estimate, the FAIR Plan exposure, reinsurance treatment, and whether the company was underestimating losses versus peers. Management said the $1.6 billion to $2 billion range is based on known total losses, total insured value, and historical wildfire payout percentages, while FAIR Plan losses are treated separately because they can be attached to reinsurance and partially recouped through policyholder surcharges. They also said they have about 2,700 claims reported, roughly 650 homeowners policies totaled, and about 150 additional totals across landlord, renters, condos, and commercial property; they expect to decide soon whether the Palisades and Eaton fires will be treated as one or two occurrences for reinsurance, and they do not see a liquidity issue.