Highlights

  • One-year basic EPS growth is 140.28%, with a P/E of 6.08 and PEG of 0.31.
  • Second quarter net income was $263.5 million, against $166.5 million a year earlier.
  • The Insurance Companies' combined ratio was 89.9% in the second quarter, against 92.5%.
  • Mercury issued $525 million of 6.25% senior notes and redeemed $375 million of notes.

Mercury General (NYSE:MCY) shares were trading at USD 101.59 on October 28, 2026, down 0.97%, alongside one-year basic EPS growth of 140.28%, a trailing twelve-month P/E of 6.08 and an expected-basis PEG of 0.31, the three figures behind its place among undervalued growth stocks. In its latest disclosures, the California-focused insurer issued $525 million of senior notes on June 12, entered a $250 million unsecured revolving credit facility on June 24, redeemed its $375 million senior notes on July 13, and reported second quarter 2026 net income of $263.5 million in a Form 10-Q dated August 4.

Based in Los Angeles, California, and incorporated in California, Mercury General is primarily engaged in writing personal automobile insurance through 12 insurance subsidiaries in 11 states, principally California. It also writes homeowners, commercial automobile, commercial property, mechanical protection and umbrella insurance, and its policies are mostly sold through independent agents. Its fiscal year ends December 31.

Growth: Second Quarter Earnings, Premiums and Combined Ratio

Net income was $263.5 million in the second quarter against $166.5 million a year earlier, and $453.9 million for the first six months against $58.1 million. Basic and diluted earnings per share were both $4.76 against $3.01 for the quarter, and $8.20 against $1.05 for the six months.

Net premiums earned rose 9.6% in the second quarter and net premiums written rose 5.3%. The company said the increase in net premiums earned was primarily due to a rate increase in the California homeowners line and more policies written in the California automobile and homeowners lines.

The Insurance Companies' second quarter loss ratio was 65.0% against 68.8%, and the combined ratio was 89.9% against 92.5%. For the six months, the combined ratio was 89.6% against 105.4%, and catastrophe losses net of reinsurance were approximately $168 million against $460 million.

Valuation: P/E of 6.08, PEG of 0.31 and Cash Generation

The P/E ratio of 6.08 is measured on trailing twelve-month earnings, and the PEG ratio of 0.31 on expected growth. Net cash provided by operating activities for the six months was $543.3 million, an increase of $240.4 million, which the company attributed primarily to higher premium collections.

Total shareholders' equity was $2,836,025 thousand at June 30, 2026, against $2,417,275 thousand at December 31, 2025.

Dividends, Notes Payable and Liquidity

Mercury declared and paid a dividend of $0.3175 per share in the second quarter, the same amount as a year earlier. Dividends paid totaled $35,172 thousand for the six months.

On June 12, 2026, the company issued $525 million of 6.25% senior unsecured notes due June 15, 2036. On June 24 it entered a $250 million unsecured revolving credit facility maturing June 24, 2031, with $50 million drawn at June 30. On July 13 the company redeemed its $375 million 4.40% senior notes due March 15, 2027.

Total debt was $943,752 thousand at June 30, against $574,527 thousand at December 31, 2025. Cash was $1,700,830 thousand, combined cash and short-term investments were $2,069.2 million.

Disclosed Risks and Outlook for Catastrophe Cover and Rates

Net losses and loss adjustment expenses on the Palisades and Eaton wildfires were $460,229 thousand at June 30, 2026, against $380,437 thousand at December 31, 2025, with $79,792 thousand recorded in the first six months. The company recorded approximately $562 million in estimated subrogation recoveries on the Eaton fire, and noted that Southern California Edison has not admitted that its equipment caused the fire.

Second quarter catastrophe losses net of reinsurance were approximately $71 million against $15 million, primarily from storms in Texas and Oklahoma. The expense ratio rose on profitability-based accruals and advertising expenses, and the company cited higher loss severity in private passenger automobile.

On regulation, the company said California rules for insurers using catastrophe modeling in rate-making require an alignment of their share of insured properties in distressed wildfire-prone areas to at least 85% of their statewide market share. A coordinated multi-state financial examination began in the second quarter of 2026, with no material findings communicated.

The California DOI approved a 6.9% homeowners rate increase effective July 2026, and the company intends to file in August 2026 for an increase of approximately 6% on California private passenger automobile with a July 2027 effective date. Its catastrophe reinsurance treaty effective through June 30, 2027 provides approximately $2,790 million of coverage after a retention of $200 million.