Why Is Mercury General (MCY) Up 9.8% Since Last Earnings Report?

A month has gone by since the last earnings report for Mercury General (MCY). Shares have added about 9.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Mercury General due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Mercury General Q2 Earnings Beat on Strong Net Investment Income

Mercury General Corporation reported second-quarter 2025 operating income of $2.67 per share, in contrast to the Zacks Consensus Estimate of a loss of 10 cents. The bottom line more than doubled year over year. The quarterly results of MCY were aided by higher net premiums earned, a rise in average invested assets and cash, and narrower catastrophe losses, offset by higher expenses.

Operational Update of MCY          

Total operating revenues in the quarter under review were $1.4 billion, which improved 11.7% year over year. This improvement was driven by higher net premiums earned, net investment income, and other income. Moreover, the top line beat the consensus mark by 0.3%. Net premiums earned climbed 10.6% year over year to $1.4 billion.

Net investment income, before income taxes, increased 14.2% year over year to $78.8 million. The growth resulted largely from higher average yield combined with higher average invested assets and cash. Total expenses of MCY rose 3.3% year over year to $1.3 billion, primarily due to higher losses and loss adjustment expenses, policy acquisition costs, and other operating expenses. 
Catastrophe losses net of reinsurance were $17 million, narrower than a loss of $125 million incurred in the year-ago quarter. The catastrophe losses reduced from the subrogation recorded on the Palisades and Eaton wildfires.

The combined ratio — a measure of underwriting profitability — improved 640 basis points (bps) year over year to 92.5. The loss ratio improved 700 bps to 68.8, while the expense ratio deteriorated 60 bps to 23.7.

Financial Update of MCY

Mercury General exited the second quarter 2025 with total assets of $9.1 billion, which was 9.3% above the level at the end of December 2024. As of June 30, 2025, MCY reported a solid cash balance of $1.1 billion, reflecting an increase of 56% from the 2024-end level. Notes payable of $574.3 million inched up 0.03% from the 2024-end level.

Debt-to-total capitalization as of June 30, 2025, improved 20 bps to 22.6% from the end of 2024. Shareholder equity was $1.9 billion as of June 30, 2025, up 1.2% from 2024-end. As of June 30, 2025, book value per share was $35.56, up 1.2% from the 2024-end.

Mercury General’s Dividend Update

The board of directors of Mercury General declared a quarterly dividend of 31.75 cents per share. The dividend will be paid on Sept. 25, 2025, to shareholders of record at the close of business as of Sept. 11, 2025.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

The consensus estimate has shifted 34.38% due to these changes.

VGM Scores

At this time, Mercury General has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock has a score of A on the value side, putting it in the top 20% for value investors.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Mercury General has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Mercury General belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, First American Financial (FAF), has gained 10.5% over the past month. More than a month has passed since the company reported results for the quarter ended June 2025.

First American Financial reported revenues of $1.84 billion in the last reported quarter, representing a year-over-year change of +14.2%. EPS of $1.53 for the same period compares with $1.27 a year ago.

First American Financial is expected to post earnings of $1.44 per share for the current quarter, representing a year-over-year change of +7.5%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.2%.

First American Financial has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.

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This article originally published on Zacks Investment Research (zacks.com).

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