Mercury General Q4 Earnings Top on Higher Net Investment Income

Mercury General Corporation MCY reported fourth-quarter 2024 operating income of $2.78 per share, which beat the Zacks Consensus Estimate by more than four-fold. The bottom line surged more than double year over year.See the Zacks Earnings Calendar to stay ahead of market-making news.The quarterly results of MCY were aided by improved net premiums and higher average invested assets and cash. However, the upside was partly offset by wider catastrophe losses and escalating expenses.Mercury General Corporation Price, Consensus and EPS Surprise Mercury General Corporation price-consensus-eps-surprise-chart | Mercury General Corporation QuoteOperational Update          Total operating revenues in the quarter under review were $1.4 billion, which improved 18.1% year over year. This improvement was driven by higher net premiums earned, net investment income and other. Also, the top line beat the consensus mark by 2.3%.Net premiums earned climbed 18.1% year over year to $1.3 billion, which matched the Zacks Consensus Estimate.Net investment income, before income taxes, increased 15.6% year over year to $73.2 million. The growth was driven largely by higher average invested assets and cash, partially offset by lower average yield. The Zacks Consensus Estimate was pegged at $70 million.Total expenses of MCY increased 9.3% year over year to $1.2 billion, primarily due to higher losses and loss adjustment expenses, policy acquisition costs and other operating expenses.Catastrophe losses net of reinsurance was $41 million, wider than a loss of $16 million incurred in the year-ago quarter. The majority of 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.The combined ratio — a measure of underwriting profitability — improved 720 basis points (bps) year over year to 91.4. The Zacks Consensus Estimate was pegged at 102. The loss ratio improved 730 bps to 68.4, while the expense ratio remained unchanged year over year to 22.9.Financial UpdateMercury General exited fourth-quarter 2024 with total assets of $8.3 billion, which was 17% above the level at the end of December 2023. As of Dec. 31, 2024, MCY reported a solid cash balance of $720 million, reflecting an increase of 30.7% from the 2023-end level.Notes payable of $574 million inched up 0.06% from the 2023-end level. Debt-to-total capitalization as of Dec. 31, 2024, improved 430 bps from the end of 2023.Shareholder equity was $1.9 billion as of Dec. 31, 2024, up 25.7% from 2023-end.As of Dec. 31, 2024, book value per share was $35.14, up 25.6% year over year.Dividend UpdateThe board of directors of Mercury General declared a quarterly dividend of 31.75 cents per share. The dividend will be paid on March 27, 2025, to shareholders of record at the close of business as of March 13, 2025.Full-Year HighlightsFull-year 2024 operating income of $7.19 per share skyrocketed 24-fold year over year.Total operating revenues increased 19% year over year in 2024 to $5.4 billion. Net investment income increased 19.3% year over year in 2024 to $280 million.Zacks RankMCY currently has a Zacks Rank #5 (Strong Sell).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Performance of Other Property and Casualty InsurersAXIS Capital Holdings Limited AXS posted fourth-quarter 2024 operating income of $2.97 per share, which beat the Zacks Consensus Estimate by 10.8%. The bottom line increased 1% year over year. Total operating revenues of $1.6 billion missed the Zacks Consensus Estimate by 2.8%. The top line rose 6.7% year over year on higher net investment income and higher premiums earned. Net premiums written increased 14% to $1.2 billion, attributable to a 9% increase in the Insurance segment and a 64% surge in the Reinsurance segment.Net investment income increased 5% year over year to $195.8 million. The Zacks Consensus Estimate was pegged at $190 million. Our estimate was $188.7 million. Total expenses in the quarter under review increased 38.4% year over year to $1.2 billion. Our estimate was pegged at $1.3 billion. Catastrophe and weather-related losses and net of reinsurance were $64 million, attributable to Hurricane Helene and other weather-related events.NMI Holdings Inc. NMIH reported fourth-quarter 2024 operating net income per share of $1.07, which missed the Zacks Consensus Estimate by 3.6%. The bottom line increased 5.9% year over year. NMI Holdings’ total operating revenues of $167 million increased 10.6% year over year on higher net premiums earned (up 8%) and net investment income (up 25%). Revenues, however, missed the Zacks Consensus Estimate by 1.7%. Primary insurance in force increased 7% to $210.2 billion.Annual persistency was 84.6%, down 150 basis points (bps) year over year.  New insurance written was $11.9 billion, up 34% year over year. Underwriting and operating expenses totaled $31.1 million, up 5% year over year. Insurance claims and claim expenses were $17.3 million, up 110% year over year. The loss ratio of 12% deteriorated 580 bps year over year. Expense ratio improved 70 bps year over year while the combined ratio of 34 deteriorated 580 bps year over year.American Financial Group, Inc. AFG reported fourth-quarter 2024 net operating earnings per share of $3.12, which missed the Zacks Consensus Estimate by 2.5%. The bottom line increased 9.9% year over year. Total revenues of $2.1 billion increased 7.2% year over year. The growth came on the back of higher P&C insurance net earned premiums and net investment income. The top line beat the Zacks Consensus Estimate by 3.5%.Net investment income climbed 22% year over year to $194 million in the quarter under review. The figure was higher than our estimate of $166.9 million and beat the Zacks Consensus Estimate of $188 million. Total cost and expenses increased 4.6% year over year to $1.8 billion due to higher P&C insurance losses and expenses. 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