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Mercury General’s Q3 profit plunges as combined ratio weakens five points to 99%

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Operating profit at Mercury General dove 47.5% in the third quarter while its combined ratio weakened by five points to 99%, the company said on Tuesday.

Adjusted diluted earnings per share dropped 48% to $0.64 per share, from $1.23 per share last year.

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In the third quarter, Mercury General posted cat losses, net of reinsurance, of $25mn at quarter-end, compared with $29mn in 2020.

For the nine months ended September 30, however, the carrier reported $91mn in cat losses, with no reinsurance benefits, resulting from the deep freeze and other extreme weather events in Texas and Oklahoma, wildfires and winter storms in California, as well as the impact of Hurricane Ida in New Jersey and New York.

These losses were partially offset by a favorable development of $5mn on last year’s catastrophe losses.

Net earned premiums rose 5% to $940.9mn from $899.3mn in the prior year quarter. Net written premiums rose 7.6% to $1.01bn, from $942.9mn last year.

Mercury General benefited from a favorable development of $8mn and $2mn on prior accident years’ loss and loss adjustment expense reserves, respectively, during the third quarter.

The carrier reported net investment income growth of 0.6% to $32.3mn. But it recorded $34.4mn in net realized investment losses, compared with a $50.9mn in net gains last year, due to an accounting change that adopts the fair value option for its investments.

In conjunction with the earnings release, the company’s board declared a quarterly dividend of $0.635 per share. The dividend will be paid on December 30.

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