Mercury General Corporation posted a combined ratio of 89.9% for the second quarter of 2026, down 2.6 percentage points from 92.5% in Q2 2025. Net income for the quarter rose 58.3% to $263.5 million.
Those comparisons carry a qualifier. First-half 2025 results were severely depressed by the Palisades and Eaton wildfires in California, which generated catastrophe losses of $460 million in that period. The year-over-year improvement is partly a function of that distorted base, not solely a change in underlying performance.
In Q1 2025, those fires drove catastrophe losses net of reinsurance to $447 million, exhausted Mercury's reinsurance tower, and triggered a $101 million reinstatement premium. That single quarter was the most damaging in the company's history.
The wildfire costs have not ended. Of Mercury's Q2 2026 catastrophe losses, approximately $80 million came from adverse reserve development on the Palisades and Eaton fires, events from January 2025.
Storms in Texas and Oklahoma generated approximately $72 million in additional gross losses. Reinsurance recoveries reduced Mercury's total net catastrophe losses for the quarter to $75 million.
Verisk estimated total insured losses from both fires at between $28 billion and $35 billion. A loss of that scale generates reserve development across multiple carriers well into 2026.
The reserve development picture was mixed across lines. Mercury recorded approximately $35 million of favorable development on prior accident years in Q2 2026, driven by lower-than-expected losses in its auto book. That gain was partially offset by adverse development on the homeowners line.
For the full first half, favorable development totaled approximately $44 million, against $47 million in H1 2025. On an accident-period basis, the H1 2026 combined ratio was 91.1%, compared with 107.2% in H1 2025. That comparison still carries the wildfire distortion from the prior year.
The Q2 loss ratio was 65%, down from 68.8% in Q2 2025. The expense ratio was 24.9%, up from 23.7%. For the first half, the loss ratio was 64.6% versus 81.5% in the same period the previous year.
Net premiums written rose 5.3% to $1.56 billion for Q2 2026 and 11.2% to $3.11 billion for the first half. Direct premiums written grew 9.3% to $1.62 billion in the quarter. Net premiums earned rose 9.6% to $1.5 billion in Q2.
Personal auto policies in force reached 1.07 million at June 30, up from 1.044 million at year-end 2025. Homeowners policies grew to 938,000 from 883,000. Mercury is expanding its California homeowners book as adverse wildfire reserve development from prior years continues to run through its results.
That growth is taking place within a broader industry shift. Under California's Sustainable Insurance Strategy, carriers that write more policies in wildfire-distressed areas can seek rate increases using forward-looking catastrophe models. Mercury secured a 6.9% California homeowners rate increase, effective July, covering more than 650,000 policyholders.
Operating income rose 31.9% to $195.2 million for Q2 2026 and reached $389.2 million for the first half, against $21.2 million in H1 2025. Net investment income grew 13.9% to $89.8 million for the quarter. Average invested assets climbed to $6.89 billion from $5.7 billion a year earlier.
Total assets reached $10.54 billion at June 30, up from $9.56 billion at year-end 2025. Shareholders' equity rose to $2.84 billion from $2.42 billion. Book value per share increased to $51.20 from $43.64 at December 31, 2025.
Mercury completed a $525 million senior notes issuance on June 12. It used part of those proceeds to redeem $375 million in senior notes on July 13. The board declared a quarterly dividend of $0.3175 per share, payable September 24 to shareholders of record on September 10.
