Mercury General Q1 Loss Narrower Than Expected, Revenues Rise Y/Y

Mercury General Corporation MCY reported first-quarter 2025 operating loss of $2.29 per share, narrower than the Zacks Consensus Estimate of a loss of $4.00. MCY had reported an operating income of 78 cents per share in the prior-year quarter.

The quarterly results of MCY were aided by higher net premiums earned and improved average invested assets, offset by wider catastrophe losses and higher expenses. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Operational Update of MCY          

Total operating revenues in the quarter under review were $1.4 billion, which improved 10.9% year over year. This improvement was driven by higher net premiums earned, net investment income and other. However, the top line missed the consensus mark by 4.4%.

Net premiums earned climbed 10% year over year to $1.3 billion. The Zacks Consensus Estimate was pegged at $1.4 billion.

Net investment income, before income taxes, increased 25.3% year over year to $81.5 million. The growth resulted largely from higher average yield combined with higher average invested assets and cash. The Zacks Consensus Estimate was pegged at $65 million.

Mercury General Corporation Price, Consensus and EPS Surprise

Mercury General Corporation price-consensus-eps-surprise-chart | Mercury General Corporation Quote

Total expenses of MCY increased 29.6% year over year to $1.5 billion, primarily due to higher losses and loss adjustment expenses, policy acquisition costs and other operating expenses. 

Catastrophe losses net of reinsurance was $447 million, wider than a loss of $72 million incurred in the year-ago quarter. The majority of catastrophe losses resulted from Southern California wildfires.

The combined ratio — a measure of underwriting profitability — deteriorated 1,830 basis points (bps) year over year to 119.2. The Zacks Consensus Estimate was pegged at 126. The loss ratio deteriorated 1,760 bps to 95.1, while the expense ratio deteriorated 60 bps to 24.

Financial Update of MCY

Mercury General exited first-quarter 2024 with total assets of $9 billion, which was 8.6% above the level at the end of December 2024. As of March 31, 2025, MCY reported a solid cash balance of $1.2 billion, reflecting an increase of 78.3% from the 2024-end level.

Notes payable of $574.2 million inched up 0.01% from the 2024-end level. Debt-to-total capitalization as of March 31, 2025, deteriorated 120 bps from the end of 2024.

Shareholder equity was $1.8 billion as of March 31, 2025, down 6.5% from 2024-end.

As of March 31, 2025, book value per share was $32.87, down 6.4% year over year.

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 June 26, 2025, to shareholders of record at the close of business as of June 12, 2025.

MCY Zacks Rank

MCY currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Property and Casualty Insurers

Arch Capital Group Ltd. ACGL reported first-quarter 2025 operating income of $1.54 per share, which beat the Zacks Consensus Estimate by 12.4%. The bottom line, however, declined 37.1% year over year. Gross premiums written improved 8.9% year over year to $6.4 billion. Net premiums written climbed 10.5% year over year to $4.5 billion on higher premiums written across its Insurance and Reinsurance segments.

Net investment income grew 15.6% year over year to $378 million and beat our estimate of $436.2 million. The Zacks Consensus Estimate was pegged at $415 million. Operating revenues of $4.5 billion rose 21.2% year over year, driven by higher net premiums earned and net investment income. It missed the Zacks Consensus Estimate by 0.9%.

RLI Corp. RLI reported first-quarter 2025 operating earnings of 92 cents per share, which beat the Zacks Consensus Estimate by 4.5%. The bottom line, however, decreased 9.2% from the prior-year quarter. Operating revenues for the reported quarter were $436 million, up 10.7% year over year, driven by higher net premiums earned and net investment income. The top line, however, missed the Zacks Consensus Estimate by 0.9%. 

Gross premiums written increased 5% year over year to $491 million. This uptick can be attributed to the solid performance of the Casualty segment (up 13.5%). Our estimate was $577.9 million. Net investment income increased 12% year over year to $36.7 million. The Zacks Consensus Estimate was pegged at $38.6 million, while our estimate for the metric was $38.9 million. The investment portfolio’s total return was 1.3% in the quarter. 

Palomar Holdings Inc. PLMR reported first-quarter 2025 operating income of $1.87 per share, which beat the Zacks Consensus Estimate by 17.6%. The bottom line increased 71.5% year over year. Total revenues improved 52.6% year over year to $177 million, mainly attributable to higher premiums and net investment income. The top line beat the Zacks Consensus Estimate by 2.9%. Gross written premiums increased 20.1% year over year to $442.1 million. Our estimate was $530.9 million. Net earned premiums increased 52.1% year over year to $164 million. Our estimate was $161.7 million. The Zacks Consensus Estimate was pegged at $160 million.

Net investment income surged 69.1% year over year to $12.1 million. The Zacks Consensus Estimate was pegged at $11.2 million. Our estimate was $8.5 million. Palomar Holdings recorded an underwriting income of $44 million, up 76.5% year over year. Adjusted underwriting income was nearly $51.6 million, up 77% year over year.

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