Mercury General Swings to a Third-Quarter Net Loss

The Tip Desk · November 4, 2026 · 3 min read

Net premiums earned were $1.55 billion, up 9.6%, as a $206.9 million after-tax investment loss produced a $13.7 million net loss.

Mercury General Corporation (MCY) reported a $13.7 million net loss, or $0.25 a share, for the three months ended September 30, 2026, reversing $280.4 million of net income, or $5.06 a share, a year earlier.

The swing came from the investment portfolio. Net realized investment losses, net of tax, were $206.9 million versus $66.7 million of gains a year earlier. Before tax the swing was $(262) million versus $84 million of gains. The company said the losses resulted largely from decreases in the fair value of its investments in the third quarter, primarily caused by large increases in overall market interest rates. Fair-value changes are recorded in net realized investment gains or losses under the fair value option.

Operating income, which excludes those realized investment results, was $193.3 million, or $3.49 a share, down 9.6% from $213.7 million, or $3.86 a share.

Net premiums earned were $1,545.4 million, up 9.6% from $1,410.4 million. Net premiums written were $1,636.1 million, up 9.2%. Direct premiums written were $1,697.6 million, up 8.7%. Growth in net premiums earned slowed from 13.2% in the first quarter. Net premiums written growth slowed from 17.9%. Direct premiums written growth was 8.7%, versus 8.8% in the first quarter.

The combined ratio was 90.2%, 3.2 points higher than 87.0% a year earlier. The loss ratio was 65.8% versus 62.6%; the expense ratio was 24.4% versus 24.4%. Catastrophe losses net of reinsurance were $23.0 million, down 20.7% from $29.0 million. The company said the majority of 2026 catastrophe losses resulted from storms in Oklahoma and Texas and adverse reserve development on the Palisades and Eaton wildfires. Catastrophe losses were $93.0 million in the first quarter.

Favorable development on prior accident years’ loss and loss adjustment expense reserves was about $58 million, versus about $27 million a year earlier.

Net investment income before taxes was $93.3 million, versus $84.0 million a year earlier. Average invested assets at cost were $7,227.7 million, versus $6,135.8 million. Average annual yield before taxes was 4.5% versus 4.6%. The company said higher net investment income resulted largely from higher average invested assets, partially offset by decreases in average annual yield and interest income on cash. The yield decline was attributed primarily to an increase in tax-exempt investments with lower pre-tax yields and lower yields on floating-rate investments from lower short-term market interest rates, partially offset by higher yields on long-term investments.

At September 30, 2026, total policies in force were 2,414 thousand, versus 2,265 thousand at December 31, 2025, including personal auto of 1,085 thousand versus 1,044 thousand and homeowners of 968 thousand versus 883 thousand. Book value per share was $50.64 versus $43.64 at year-end 2025. Statutory surplus was $2.88 billion versus $2.39 billion.

The board declared a quarterly dividend of $0.3175 a share, payable December 31, 2026, to shareholders of record on December 17, 2026.