tiprankstipranks
Mercury General Corp. (MCY)
NYSE:MCY

Mercury General (MCY) AI Stock Analysis

Compare
255 Followers

Top Page

MC

Mercury General

(NYSE:MCY)

73Outperform
Mercury General's stock is well-supported by strong financial performance and attractive valuation. The company's robust revenue and profit growth, alongside efficient cash flow management and a solid balance sheet, provide a strong foundation. However, significant catastrophe losses and rising reinsurance costs pose risks to future stability. Technical indicators show mixed signals, with short-term bullish momentum but long-term caution. Overall, the stock offers potential value with risks to consider.

Mercury General (MCY) vs. S&P 500 (SPY)

Mercury General Business Overview & Revenue Model

Company DescriptionMercury General Corporation, together with its subsidiaries, engages in writing personal automobile insurance in the United States. The company also writes homeowners, commercial automobile, commercial property, mechanical protection, and umbrella insurance products. Its automobile insurance products include collision, property damage, bodily injury, comprehensive, personal injury protection, underinsured and uninsured motorist, and other hazards; and homeowners insurance products comprise dwelling, liability, personal property, fire, and other hazards. The company sells its policies through a network of independent agents and insurance agencies, as well as directly through internet sales portals in Arizona, California, Florida, Georgia, Illinois, Nevada, New Jersey, New York, Oklahoma, Texas, and Virginia. Mercury General Corporation was founded in 1961 and is headquartered in Los Angeles, California.
How the Company Makes MoneyMercury General makes money primarily through the premiums collected from the insurance policies it underwrites. As a property and casualty insurer, its key revenue streams include personal automobile insurance, which constitutes the majority of its premium income, followed by homeowners insurance. The company also invests the premiums collected in various financial instruments, generating investment income that contributes to its overall earnings. Additionally, Mercury General's profitability is influenced by its claims management efficiency, underwriting expertise, and expense management. Strategic partnerships with independent agents and brokers enable the company to expand its market reach and enhance customer acquisition, thereby driving revenue growth.

Mercury General Financial Statement Overview

Summary
Mercury General's financials display a strong recovery with significant revenue growth and improved profitability. The company has a solid balance sheet with low leverage and strong cash flow generation. However, the absence of EBIT and EBITDA margins warrants cautious analysis.
Income Statement
72
Positive
Mercury General has shown strong revenue growth with a 18.3% increase from 2023 to 2024, following a 27.1% growth from 2022 to 2023. The net profit margin improved significantly, from 2.1% in 2023 to 8.5% in 2024. However, EBIT and EBITDA margins have not been provided for 2024, indicating a need for careful examination of operational efficiency.
Balance Sheet
65
Positive
The company maintains a relatively low debt-to-equity ratio, decreasing from 0.38 in 2023 to 0.29 in 2024, signaling a strong balance sheet. Return on Equity improved significantly to 24.0% in 2024 from 6.2% in 2023. The equity ratio remained stable at around 23.4% in 2024, supporting a solid financial base.
Cash Flow
78
Positive
Operating cash flow to net income ratio is strong at 2.2 in 2024, reflecting efficient cash generation from operations. Free cash flow increased significantly by 138.0% from 2023 to 2024, indicating improved liquidity and operational efficiency. The free cash flow to net income ratio is high at 2.1 in 2024, further emphasizing cash flow strength.
Breakdown
Dec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
5.48B4.63B3.64B3.99B3.78B
Gross Profit
5.48B4.35B3.36B3.71B3.50B
EBIT
0.000.00-354.63M289.28M450.21M
EBITDA
0.00195.84M-571.09M395.48M544.01M
Net Income Common Stockholders
467.95M96.34M-512.67M247.94M374.61M
Balance SheetCash, Cash Equivalents and Short-Term Investments
720.26M729.39M412.71M475.68M724.09M
Total Assets
8.31B7.10B6.51B6.77B6.33B
Total Debt
574.13M587.96M420.25M407.51M416.36M
Net Debt
-146.13M37.06M130.48M71.95M67.88M
Total Liabilities
6.36B5.56B4.99B4.63B4.30B
Stockholders Equity
1.95B1.55B1.52B2.14B2.03B
Cash FlowFree Cash Flow
990.98M416.18M317.08M460.14M565.66M
Operating Cash Flow
1.04B452.99M352.59M501.58M605.62M
Investing Cash Flow
-796.66M-295.44M-316.38M-373.67M-411.29M
Financing Cash Flow
-71.11M103.58M-81.99M-140.84M-140.25M

Mercury General Technical Analysis

Technical Analysis Sentiment
Negative
Last Price56.15
Price Trends
50DMA
53.21
Positive
100DMA
60.99
Negative
200DMA
60.23
Negative
Market Momentum
MACD
0.67
Positive
RSI
54.21
Neutral
STOCH
27.60
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For MCY, the sentiment is Negative. The current price of 56.15 is above the 20-day moving average (MA) of 55.70, above the 50-day MA of 53.21, and below the 200-day MA of 60.23, indicating a neutral trend. The MACD of 0.67 indicates Positive momentum. The RSI at 54.21 is Neutral, neither overbought nor oversold. The STOCH value of 27.60 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for MCY.

Mercury General Risk Analysis

Mercury General disclosed 43 risk factors in its most recent earnings report. Mercury General reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

Mercury General Peers Comparison

Overall Rating
UnderperformOutperform
Sector (63)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
82
Outperform
$23.13B10.1717.61%2.19%13.22%24.83%
PGPGR
80
Outperform
$165.90B19.6536.98%1.73%21.36%118.77%
HIHIG
79
Outperform
$35.31B11.9619.58%1.56%8.19%29.77%
TRTRV
75
Outperform
$59.96B12.3218.94%1.57%12.23%68.50%
MCMCY
73
Outperform
$3.10B6.6226.78%2.27%18.27%385.75%
ALALL
72
Outperform
$54.88B12.1923.80%1.78%12.28%
63
Neutral
$14.35B9.948.94%4.37%16.34%-11.76%
* Financial Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
MCY
Mercury General
56.15
4.44
8.59%
ALL
Allstate
207.50
38.36
22.68%
CINF
Cincinnati Financial
147.45
28.77
24.24%
HIG
Hartford Financial
124.39
24.27
24.24%
PGR
Progressive
284.29
78.50
38.15%
TRV
Travelers Companies
264.54
40.66
18.16%

Mercury General Earnings Call Summary

Earnings Call Date: Feb 11, 2025 | % Change Since: 12.75% | Next Earnings Date: May 6, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted strong financial performance in terms of record operating income, improved combined ratios, and significant premium growth. However, these positive results are overshadowed by the substantial impact of catastrophe losses from wildfires and the expected increase in reinsurance costs, leading to concerns about future financial stability.
Highlights
Record After-Tax Operating Income
The company reported a fourth quarter after-tax operating income of $98 million, the highest in the company's history.
Improved Combined Ratios
The combined ratio for the quarter was 91.4%, and 96% for the year-to-date. Excluding catastrophe losses, the combined ratio was 88.3% for the quarter and 90.5% for the full year.
Strong Investment Income Growth
Investment income after tax was $61.5 million in Q4, increasing by 15% from the prior quarter and 18% from the previous year.
Significant Premium Growth
Net premiums written grew by 16% to $1.3 billion in the quarter and 20.5% to $5.4 billion for the year.
Favorable Personal Auto and Homeowners Results
The personal auto business posted a core underlying combined ratio of 92.1%, and the homeowners business posted a core underlying combined ratio of 76.1% for the full year.
Lowlights
Catastrophe Losses Impact
Catastrophe losses were $41 million for the quarter, adding 3 points to the combined ratio. Full-year catastrophe losses added 5.5 points to the combined ratio.
Significant Expected Catastrophe Losses for 2025
Gross catastrophe losses from January wildfires are estimated to be $1.6 billion, with pre-tax net catastrophe losses estimated between $155 million to $325 million.
Reinsurance Cost Concerns
Reinsurance costs are expected to increase moderately due to recent catastrophic events and will impact future pricing and premiums.
Uncertain Impact of Fair Plan Losses
There is uncertainty regarding the total impact of Fair Plan losses, with an expected $50 million assessment, 50% of which is recoupable.
Company Guidance
During Mercury General Corporation's fourth quarter 2024 conference call, the company reported its highest-ever after-tax operating income of $98 million, driven by rate increases and moderating inflation, which reduced the combined ratio to 91.4% for the quarter and 96% for the year. Catastrophe losses totaled $41 million, impacting the full-year combined ratio by 5.5 points, and excluding these losses, the combined ratio was 88.3% for the quarter and 90.5% for the year. Investment income after tax rose by 15% in the fourth quarter to $61.5 million, spurred by a 16% increase in average investment balances. Net premiums written grew by 16% in the quarter and 20.5% for the full year, reaching $1.3 billion and $5.4 billion, respectively. Looking forward to 2025, the company expects core underlying earnings to offset wildfire-related catastrophe losses, with investment income anticipated to remain near 2024 levels. The company estimates gross catastrophe losses from January wildfires at $1.6 billion and pretax net losses between $155 million and $325 million, with reinstatement premiums of $80 million to $101 million.

Mercury General Corporate Events

Business Operations and Strategy
Mercury General Addresses Impact of California Wildfires
Neutral
Jan 21, 2025

On January 20, 2025, Mercury General Corporation announced additional details regarding the impact of the recent Southern California wildfires, known as the Palisades and Eaton fires, on its operations and reinsurance program. The company has mobilized its catastrophe loss team and has already paid $80 million to policyholders for living expenses and housing contents, with sufficient liquidity to handle the increased claims. Each wildfire has been designated as a separate event by the Property Claims Service, allowing Mercury to potentially use reinsurance limits of up to $1,290 million for the first event and $1,238 million for the second, implying significant financial management to cover the catastrophic losses.

Business Operations and StrategyFinancial Disclosures
Mercury General Assesses Impact of California Wildfires
Negative
Jan 10, 2025

Mercury General Corporation has released its preliminary assessment of the recent wildfires in Southern California, which have caused extensive damage since January 7, 2025. The company expects losses from the wildfires to exceed its reinsurance retention level of $150 million, with a reinsurance program that provides $1,290 million in limits per occurrence. Mercury’s claims adjusters are actively assisting customers, and further guidance on the claims process is available on their website.

Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.