Consolidated Highlights
Three Months Ended
December 31,
Change
Twelve Months Ended
December 31,
Change
2025
2024
$
%
2025
2024
$
%
(000's except per-share amounts and ratios)
Net premiums earned (2)
$ 1,445,404
$ 1,352,101
$ 93,303
6.9 %
$ 5,505,613
$ 5,075,456
$ 430,157
8.5 %
Net premiums written (1) (2)
$ 1,427,731
$ 1,314,933
$ 112,798
8.6 %
$ 5,721,778
$ 5,378,310
$ 343,468
6.4 %
Direct premiums written (1)
$ 1,490,371
$ 1,346,718
$ 143,653
10.7 %
$ 5,982,537
$ 5,500,835
$ 481,702
8.8 %
Net realized investment gains (losses), net of tax (3)
$ 92
$ (52,823)
$ 52,915
NM
$ 103,781
$ 70,050
$ 33,731
48.2 %
Net income
$ 202,547
$ 101,068
$ 101,479
100.4 %
$ 541,094
$ 467,953
$ 73,141
15.6 %
Net income per diluted share
$ 3.66
$ 1.82
$ 1.84
101.1 %
$ 9.77
$ 8.45
$ 1.32
15.6 %
Operating income (1)
$ 202,455
$ 153,891
$ 48,564
31.6 %
$ 437,313
$ 397,903
$ 39,410
9.9 %
Operating income per diluted share (1)
$ 3.66
$ 2.78
$ 0.88
31.7 %
$ 7.90
$ 7.19
$ 0.71
9.9 %
Catastrophe losses net of reinsurance (4)
$ 19,000
$ 41,000
$ (22,000)
(53.7) %
$ 508,000
$ 277,000
$ 231,000
83.4 %
Combined ratio (5)
88.6 %
91.4 %
—
(2.8) pts
96.3 %
96.0 %
—
0.3 pts
NM = Not Meaningful
(1)
These measures are not based on U.S. generally accepted accounting principles ("GAAP"), are defined in "Information Regarding GAAP and Non-GAAP Measures" and are reconciled to the most directly comparable GAAP measures in "Supplemental Schedules."
(2)
Both net premiums earned and net premiums written for the twelve months ended December 31, 2025 include $101 million of increased ceded premiums due to the reinstatement premiums paid and recorded in the first half of 2025 to reinstate the fully exhausted reinsurance coverage layers of the Company's catastrophe reinsurance treaty ending June 30, 2025 following the Palisades and Eaton wildfires in January 2025.
(3)
Net realized investment gains (losses) before tax were $0.1 million and $(66.9) million for the three months ended December 31, 2025 and 2024, respectively, and $131.4 million and $88.7 million for the twelve months ended December 31, 2025 and 2024, respectively. The changes in fair value of the Company's investments are recorded as part of net realized investment gains or losses in its consolidated statements of operations due to the adoption of the fair value option for its investments as permitted under GAAP.
(4)
The majority of 2025 catastrophe losses resulted from from the Palisades and Eaton wildfires in California and severe storms in Texas, Oklahoma and California. The majority of 2024 catastrophe losses resulted from tornadoes, hailstorms and convective storms in Texas and Oklahoma, winter storms, rainstorms and wildfires in California, and the impact of Hurricane Helene in Florida and Georgia.
(5)
The Company experienced favorable development of approximately $18 million and unfavorable development of approximately $8 million on prior accident years' loss and loss adjustment expense reserves for the three months ended December 31, 2025 and 2024, respectively, and favorable development of approximately $92 million and unfavorable development of approximately $25 million on prior accident years' loss and loss adjustment expense reserves for the twelve months ended December 31, 2025 and 2024, respectively. The year-to-date favorable development in 2025 was primarily attributable to lower than estimated losses and loss adjustment expenses in the automobile and homeowners lines of insurance business, including favorable development on the prior years' catastrophe losses. The year-to-date unfavorable development in 2024 was primarily attributable to higher than estimated losses and loss adjustment expenses in the commercial automobile and commercial property lines of insurance business, partially offset by favorable reserve development in the private passenger automobile line of insurance business.
Investment Results
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2025
2024
2025
2024
(000's except average annual yield)
Average invested assets at cost (1)
$ 6,367,236
$ 6,023,948
$ 5,968,575
$ 5,683,973
Net investment income (2)(3)
Before income taxes
$ 84,493
$ 73,262
$ 328,701
$ 279,989
After income taxes
$ 71,598
$ 61,491
$ 276,214
$ 235,419
Average annual yield on investments - after income taxes (2)(3)
3.9 %
3.7 %
4.0 %
3.8 %
(1)
Fixed maturities and short-term bonds at amortized cost; equities and other short-term investments at cost. Average invested assets at cost are based on the monthly amortized cost of the invested assets for each period.
(2)
Net investment income includes interest income earned on cash of $12.3 million and $6.9 million ($9.7 million and $5.4 million after tax) for the three months ended December 31, 2025 and 2024, respectively, and $50.7 million and $25.5 million ($40.1 million and $20.2 million after tax) for the twelve months ended December 31, 2025 and 2024, respectively. Average annual yield on investments does not include interest income earned on cash.
(3)
The higher net investment income before and after income taxes for the three and twelve months ended December 31, 2025 compared to the corresponding periods in 2024 resulted largely from higher average invested assets and cash combined with higher average yield. Average annual yield on investments after income taxes for the three and twelve months ended December 31, 2025 increased compared to the corresponding periods in 2024, primarily due to the maturity and replacement of lower yielding investments purchased when market interest rates were lower with higher yielding investments, combined with the higher average yield on investments purchased in 2025 using cash generated from operations compared to the average yield on overall investments in 2024.
Gabe Tirador, the Company's CEO, commented on the 2025 results: "We are proud of our team's accomplishments in 2025. The Palisades and Eaton wildfires were the most significant catastrophes in Mercury's history, driving our first quarter combined ratio to 119.2%, but our business in subsequent quarters performed strongly ending with an 88.6% combined ratio in the fourth quarter and 96.3% for the full year. And our team demonstrated exceptional resilience and commitment to our policyholders, managing more than 2,900 wildfire claims and paying over $1.4 billion to date."
The California Department of Insurance ("DOI") approved a 6.9% rate increase on the Company's California homeowners line of insurance business in December 2025. This rate increase is expected to become effective in July 2026. The California homeowners line of insurance business represented approximately 15% of the Company's total net premiums earned in 2025.
The Board of Directors declared a quarterly dividend of $0.3175 per share. The dividend will be paid on March 26, 2026 to shareholders of record on March 12, 2026.
Updated Information Regarding the Palisades and Eaton Wildfires
In January 2025, extreme wind-driven wildfires caused widespread damage across parts of Southern California, primarily in the communities of Pacific Palisades and Altadena. The two largest of these Southern California wildfires are known as the Palisades and Eaton wildfires. The Company recorded net catastrophe losses and loss adjustment expenses before taxes from the Palisades and Eaton wildfires of approximately $380 million in its consolidated statement of operations for the year ended December 31, 2025. The following table presents the components of net losses and loss adjustment expenses from the Palisades and Eaton wildfires as of December 31, 2025.
For the Twelve
Months Ended
December 31, 2025
(Amounts in
thousands)
Gross losses and loss adjustment expenses
$ 2,191,752
Subrogation recoverable - Eaton fire (1) ***
(537,506)
Subrogation recovered and recoverable - Palisades fire (2) ***
(48,026)
Reinsurance recovered and recoverable (3)
(1,293,500)
Net catastrophe losses and loss adjustment expenses on Eaton and Palisades fires before FAIR Plan
$ 312,720
Company's share of FAIR Plan losses and loss adjustment expenses (4)
$ 92,717
Recoupable portion of FAIR Plan losses and loss adjustment expenses (5)
(25,000)
Net FAIR Plan losses and loss adjustment expenses
$ 67,717
Net losses and loss adjustment expenses on Eaton and Palisades fires
