# EDGAR Filing Document

**Accession Number:** 0000064996
**File Stem:** 0000950170-23-002780
**Filing Date:** 2023-2
**Character Count:** 32469
**Document Hash:** a7a02605c8113c47484accf7faa3a595
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0000950170-23-002780.hdr.sgml**: 20230214

**ACCESSION NUMBER**: 0000950170-23-002780

**CONFORMED SUBMISSION TYPE**: 8-K

**PUBLIC DOCUMENT COUNT**: 14

**CONFORMED PERIOD OF REPORT**: 20230214

**ITEM INFORMATION**: Results of Operations and Financial Condition

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20230214

**DATE AS OF CHANGE**: 20230214

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** MERCURY GENERAL CORP
- **CENTRAL INDEX KEY:** 0000064996
- **STANDARD INDUSTRIAL CLASSIFICATION:** FIRE, MARINE & CASUALTY INSURANCE [6331]
- **IRS NUMBER:** 952211612
- **STATE OF INCORPORATION:** CA
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-12257
- **FILM NUMBER:** 23629054

**BUSINESS ADDRESS:**
- **STREET 1:** 4484 WILSHIRE BLVD
- **CITY:** LOS ANGELES
- **STATE:** CA
- **ZIP:** 90010
- **BUSINESS PHONE:** 2139371060

**MAIL ADDRESS:**
- **STREET 1:** 4484 WILSHIRE BLVD
- **CITY:** LOS ANGELES
- **STATE:** CA
- **ZIP:** 90010

?xml version="1.0" encoding="ASCII"? 8-K

**UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549**

------

**FORM** 8-K

------

**CURRENT REPORT**

**Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934**

**Date of Report (Date of earliest event reported):** February 14, 2023<br>

------

MERCURY GENERAL CORPORATION

**(Exact name of Registrant as Specified in Its Charter)**

------

---

| | | |
|:---|:---|:---|
| California | 001-12257 | 95-2211612 |
| **(State or Other Jurisdiction<br>of Incorporation)** | **(Commission File Number)** | **(IRS Employer<br>Identification No.)** |
| 4484 Wilshire Boulevard |  |  |
| Los Angeles,**,** California |  | 90010 |
| **(Address of Principal Executive Offices)** |  | **(Zip Code)** |

---

**Registrant's Telephone Number, Including Area Code:** 323 937-1060<br>

Not applicable

**(Former Name or Former Address, if Changed Since Last Report)**

------

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

**Securities registered pursuant to Section 12(b) of the Act:**

---

| | | |
|:---|:---|:---|
| **<br>Title of each class** | **Trading<br>Symbol(s)** | **<br>Name of each exchange on which registered** |
| Common Stock | MCY | The New York Stock Exchange |

---

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

------

**Item 2.02. Results of Operations and Financial Condition**

The following information is furnished pursuant to Item 2.02, "Results of Operations and Financial Condition," and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. Such information, including Exhibit 99.1, shall not be incorporated by reference into any filing of Mercury General Corporation (the "Company"), whether made before or after the date hereof, regardless of any general incorporation language in such filing.

On February 14, 2023, the Company issued a press release announcing its financial results for the fourth quarter ended December 31, 2022. A copy of the press release is attached hereto as Exhibit 99.1.

**Item 9.01. Financial Statements and Exhibits**

(d) <u>Exhibits</u>.

---

| | |
|:---|:---|
| 99.1 | [<u>Press Release, dated February 14, 2023, issued by Mercury General Corporation, furnished pursuant to Item 2.02 of Form 8-K. The information contained in the attached exhibit should be read in conjunction with the Company's annual report on Form 10-K filed on February 14, 2023.</u>](mcy-ex99_1.htm) |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |

---

------

**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

---

| | | |
|:---|:---|:---|
|  | **MERCURY GENERAL CORPORATION** | **MERCURY GENERAL CORPORATION** |
| Date: February 14, 2023 |  |  |
|  | By:  | /s/Theodore R. Stalick |
|  | Name: | Theodore R. Stalick  |
|  | Its:  | Senior Vice President and Chief Financial Officer |

---

------

## Ex-99

**Exhibit 99.1**

**Mercury General Corporation Announces Fourth Quarter and Fiscal 2022 Results and Declares Quarterly Dividend**

LOS ANGELES, Feb. 14, 2023 /PRNewswire/ -- Mercury General Corporation (NYSE: MCY) reported today the fourth quarter and fiscal 2022 results:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **<u>Consolidated Highlights</u>** | **<u>Consolidated Highlights</u>** | **<u>Consolidated Highlights</u>** | **<u>Consolidated Highlights</u>** | **<u>Consolidated Highlights</u>** | **<u>Consolidated Highlights</u>** | **<u>Consolidated Highlights</u>** |
|  | **Three Months Ended <br>December 31,** | **Three Months Ended <br>December 31,** | **Change** | **Twelve Months Ended <br>December 31,** | **Twelve Months Ended <br>December 31,** | **Change** |
|  | **2022** | **2021** | $**%** | **2022** | **2021** | $**%** |
| *(000's except per-share amounts and ratios)* | *(000's except per-share amounts and ratios)* |  |  |  |  |  |
| Net premiums earned  | $1005482 | $958266 | 4.9% | $3952482 | $3741948 | 5.6% |
| Net premiums written <sup>(1) (2)</sup>  | $915750 | $932678 | (1.8) % | $3978017 | $3855369 | 3.2% |
| Net realized investment gains (losses), net of tax <sup>(3)</sup> | $73595 | $43217 | 70.3% | $(385583) | $88210 | (537.1) % |
| Net (loss) income | $(6770) | $30473 | (122.2) % | $(512672) | $247937 | (306.8) % |
| Net (loss) income per diluted share <sup>(4)</sup> | $(0.12) | $0.55 | (121.8) % | $(9.26) | $4.48 | (306.7) % |
| Operating (loss) income <sup>(1)</sup> | $(80365) | $(12744) | NM | $(127089) | $159727 | (179.6) % |
| Operating (loss) income per diluted share <sup>(1)</sup> | $(1.45) | $(0.23) | NM | $(2.30) | $2.88 | (179.9) % |
| Catastrophe losses net of reinsurance <sup>(5)</sup> | $40000 | $19000 | 110.5% | $102000 | $104000 | (1.9) % |
| Combined ratio <sup>(6)</sup> | 115.8% | 105.4% | 10.4 pts | 108.7% | 98.3% | 10.4 pts |

---

---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;NM = Not Meaningful | &nbsp;&nbsp;&nbsp;&nbsp;NM = Not Meaningful |
| <sup>(1)</sup>  | These measures are not based on U.S. generally accepted accounting principles ("GAAP"), are defined in "Information Regarding GAAP and Non-GAAP Measures" and are reconciled to the most directly comparable GAAP measures in "Supplemental Schedules." |
| <sup>(2)</sup> <br>| During 2022, the Company discontinued offering twelve-month private passenger automobile policies on new and renewal businesses in most states where it operates, including California, which contributed to the decrease in net premiums written for the three months ended December 31, 2022 compared to the same period in 2021. At December 31, 2022, the Company's twelve-month private passenger automobile policies represented approximately 21% of its total private passenger automobile policies in force.  |
| <sup>(3)</sup> <br>| Net realized investment gains (losses) before tax were $93 million and $55 million for the three months ended December 31, 2022 and 2021, respectively, and $(488) million and $112 million for the twelve months ended December 31, 2022 and 2021, respectively. The changes in fair value of the Company's investments are recorded as part of net realized investment gains or losses in its consolidated statements of operations due to the adoption of the fair value option for its investments as permitted under GAAP. |
| <sup>(4)</sup>  | Any incremental shares are excluded from the net loss per diluted share calculation as their effect would be anti-dilutive, in accordance with GAAP. |
| <sup>(5)</sup> <br>| Catastrophe losses due to the events that occurred during the three and twelve months ended December 31, 2022 totaled approximately $43 million and $101 million, respectively, with no reinsurance benefits used for these losses. In addition, the Company experienced favorable development of approximately $3 million and unfavorable development of approximately $1 million on prior years' catastrophe losses for the three and twelve months ended December 31, 2022, respectively. The majority of 2022 catastrophe losses resulted from the deep freeze of Winter Storm Elliott and other extreme weather events in Texas, Oklahoma and Georgia, winter storms in California, and the impact of Hurricane Ian in Florida. Catastrophe losses due to the events that occurred during the three and twelve months ended December 31, 2021 totaled approximately $18 million and $109 million, respectively, with no reinsurance benefits used for these losses. In addition, the Company experienced unfavorable development of approximately $1 million and favorable development of approximately $5 million on prior years' catastrophe losses for the three and twelve months ended December 31, 2021. The majority of 2021 catastrophe losses resulted from the deep freeze of Winter Storm Uri and other extreme weather events in Texas and Oklahoma, rainstorms, wildfires and winter storms in California, and the impact of Hurricane Ida in New Jersey and New York. |
| <sup>(6)</sup> <br>| The Company experienced favorable development of approximately $3 million and $2 million on prior accident years' loss and loss adjustment expense reserves for the three months ended December 31, 2022 and 2021, respectively, and unfavorable development of approximately $47 million and favorable development of approximately $26 million on prior accident years' loss and loss adjustment expense reserves for the twelve months ended December 31, 2022 and 2021, respectively. Inflationary trends have accelerated to their highest level in decades in 2022, which has had a significant impact on the cost of automobile parts and labor as well as medical expenses for bodily injuries, and supply chain and labor shortage issues have lengthened the time to repair vehicles. Bodily injury costs were also under pressure from social inflation. These factors have increased losses and loss adjustment expenses for the insured events of the current accident year for 2022 compared to 2021, and have led to adverse development on prior accident years' loss and loss adjustment expense reserves for 2022 as those factors affected the loss estimates recorded at December 31, 2021. The Company has filed for rate increases in many states and is taking various non-rate actions to improve profitability. The year-to-date favorable development in 2021 was primarily attributable to lower than estimated losses and loss adjustment expenses in the homeowners and private passenger automobile lines of insurance business. |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **<u>Investment Results</u>** | **<u>Investment Results</u>** | **<u>Investment Results</u>** | **<u>Investment Results</u>** |
|  | **Three Months Ended <br>December 31,** | **Three Months Ended <br>December 31,** | **Twelve Months Ended <br>December 31,** | **Twelve Months Ended <br>December 31,** |
|  | **2022** | **2021** | **2022** | **2021** |
| *(000's except average annual yield)* |  |  |  |  |
| Average invested assets at cost <sup>(1)</sup> | $4934646 | $4799548 | $4902755 | $4681462 |
| Net investment income <sup>(2)</sup> |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Before income taxes | $49887 | $34161 | $168356 | $129727 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After income taxes | $43113 | $30048 | $146204 | $115216 |
| Average annual yield on investments - after income taxes <sup>(2)</sup> | 3.5% | 2.5% | 3.0% | 2.5% |

---

<sup>(1)</sup> Fixed maturities and short-term bonds at amortized cost; equities and other short-term investments at cost. Average invested assets at cost are based on the monthly amortized cost of the invested assets for each period.

<sup>(2)</sup> The higher net investment income before and after income taxes for the three and twelve months ended December 31, 2022 compared to the corresponding periods in 2021 resulted largely from higher average yield combined with higher average invested assets. Average annual yield on investments after income taxes for the three and twelve months ended December 31, 2022 increased compared to the corresponding periods in 2021, primarily due to the maturity and replacement of lower yielding investments purchased when market interest rates were lower with higher yielding investments, as a result of increasing market interest rates, as well as higher yields on investments based on floating interest rates.

On January 31, 2023, the California Department of Insurance approved a 6.9% rate increase on the private passenger automobile line of insurance business of Mercury Insurance Company ("MIC") and California Automobile Insurance Company ("CAIC"), insurance subsidiaries of the Company. MIC's and CAIC's private passenger automobile line of insurance business represented approximately 51% and 5%, respectively, of the Company's total net premiums earned in 2022. The Company plans to implement these rate increases in March 2023. In addition, the Company plans to file for another 6.9% rate increase with the California DOI in March 2023 on each of MIC's and CAIC's California private passenger automobile line of insurance business.

In January 2023, California was inundated with a series of atmospheric river rainstorms. The Company estimates the catastrophe losses from these storms will be approximately $35 million, which will be recorded as losses for the first quarter of 2023.

The Board of Directors declared a quarterly dividend of $0.3175 per share. The dividend will be paid on March 29, 2023 to shareholders of record on March 15, 2023.

Mercury General Corporation and its subsidiaries are a multiple line insurance organization offering predominantly personal automobile and homeowners insurance through a network of independent producers and direct-to-consumer sales in many states. For more information, visit the Company's website at <u>www.mercuryinsurance.com</u>.

*The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain forward-looking statements. Certain statements contained in this report are forward-looking statements based on the Company's current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that future developments affecting the Company will be those anticipated by the Company. Actual results may differ from those projected in the forward-looking statements. These forward-looking statements involve significant risks and uncertainties (some of which are beyond the control of the Company) and are subject to change based upon various factors, including but not limited to the following risks and uncertainties: changes in the demand for the Company's insurance products, inflation and general economic conditions, including general market risks associated with the Company's investment portfolio; the accuracy and adequacy of the Company's pricing methodologies; catastrophes in the markets served by the Company; uncertainties related to estimates, assumptions and projections generally; the possibility that actual loss experience may vary adversely from the actuarial estimates made to determine the Company's loss reserves in general; the Company's ability to obtain and the timing of the approval of premium rate changes for insurance policies issued in states where the Company operates; legislation adverse to the automobile insurance industry or business generally that may be enacted in the states where the Company operates; the Company's success in managing its business in non-California states; the presence of competitors with greater financial resources and the impact of competitive pricing and marketing efforts; the Company's ability to successfully manage its claims organization outside of California; the Company's ability to successfully allocate the resources used in the states with reduced or exited operations to its operations in other states; changes in driving patterns and loss trends; acts of war and terrorist activities; pandemics, epidemics, widespread health emergencies, or outbreaks of infectious diseases; court decisions and trends in litigation and health care and auto repair costs; and legal, cyber security, regulatory and litigation risks. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise. For a more detailed discussion of some of the foregoing risks and uncertainties, see the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission.*

---

| | | | | |
|:---|:---|:---|:---|:---|
| **MERCURY GENERAL CORPORATION AND SUBSIDIARIES <br>SUMMARY OF OPERATING RESULTS** <br> (000's except per-share amounts and ratios) <br>(unaudited) | **MERCURY GENERAL CORPORATION AND SUBSIDIARIES <br>SUMMARY OF OPERATING RESULTS** <br> (000's except per-share amounts and ratios) <br>(unaudited) | **MERCURY GENERAL CORPORATION AND SUBSIDIARIES <br>SUMMARY OF OPERATING RESULTS** <br> (000's except per-share amounts and ratios) <br>(unaudited) | **MERCURY GENERAL CORPORATION AND SUBSIDIARIES <br>SUMMARY OF OPERATING RESULTS** <br> (000's except per-share amounts and ratios) <br>(unaudited) | **MERCURY GENERAL CORPORATION AND SUBSIDIARIES <br>SUMMARY OF OPERATING RESULTS** <br> (000's except per-share amounts and ratios) <br>(unaudited) |
|  | **Three Months Ended <br>December 31,** | **Three Months Ended <br>December 31,** | **Twelve Months Ended <br>December 31,** | **Twelve Months Ended <br>December 31,** |
|  | **2022** | **2021** | **2022** | **2021** |
| Revenues: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net premium earned | $1005482 | $958266 | $3952482 | $3741948 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net investment income | 49887 | 34161 | 168356 | 129727 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net realized investment gains (losses) | 93158 | 54705 | (488080) | 111658 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other | 3166 | 2141 | 10308 | 10024 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenues | $1151693 | $1049273 | $3643066 | $3993357 |
| Expenses: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Losses and loss adjustment expenses | 926045 | 778637 | 3362219 | 2760155 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Policy acquisition costs | 167168 | 164829 | 654612 | 633385 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other operating expenses | 71413 | 66674 | 279718 | 283397 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest | 4409 | 4268 | 17232 | 17113 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total expenses | $1169035 | $1014408 | $4313781 | $3694050 |
| (Loss) income before income taxes | (17342) | 34865 | (670715) | 299307 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income tax (benefit) expense | (10572) | 4392 | (158043) | 51370 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net (loss) income | $(6770) | $30473 | $(512672) | $247937 |
| Basic average shares outstanding | 55371 | 55371 | 55371 | 55368 |
| Diluted average shares outstanding  | 55371 | 55374 | 55371 | 55374 |
| <u>Basic Per Share Data</u> |  |  |  |  |
| Net (loss) income | $(0.12) | $0.55 | $(9.26) | $4.48 |
| Net realized investment gains (losses), net of tax | $1.33 | $0.78 | $(6.96) | $1.59 |
| <u>Diluted Per Share Data</u> |  |  |  |  |
| Net (loss) income | $(0.12) | $0.55 | $(9.26) | $4.48 |
| Net realized investment gains (losses), net of tax | $1.33 | $0.78 | $(6.96) | $1.59 |
| <u>Operating Ratios-GAAP Basis</u> |  |  |  |  |
| Loss ratio | 92.1% | 81.3% | 85.1% | 73.8% |
| Expense ratio | 23.7% | 24.2% | 23.6% | 24.5% |
| Combined ratio <sup>(a)</sup> | 115.8% | 105.4% | 108.7% | 98.3% |

---

<br>&nbsp;&nbsp;&nbsp;&nbsp;(a) Combined ratio for the three months ended December 31, 2021 does not sum due to rounding.

---

| | | |
|:---|:---|:---|
| **MERCURY GENERAL CORPORATION AND SUBSIDIARIES <br>CONDENSED BALANCE SHEETS AND OTHER INFORMATION** <br> (000's except per-share amounts and ratios) | **MERCURY GENERAL CORPORATION AND SUBSIDIARIES <br>CONDENSED BALANCE SHEETS AND OTHER INFORMATION** <br> (000's except per-share amounts and ratios) | **MERCURY GENERAL CORPORATION AND SUBSIDIARIES <br>CONDENSED BALANCE SHEETS AND OTHER INFORMATION** <br> (000's except per-share amounts and ratios) |
|  | **December 31, 2022** | **December 31, 2021** |
|  | (unaudited) |  |
| **<u>ASSETS</u>** |  |  |
| Investments, at fair value: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fixed maturity securities (amortized cost $4,226,790; $3,909,780) | $4088311 | $4031523 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equity securities (cost $668,843; $$754,536) | 699552 | 970939 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Short-term investments (cost $123,928; $141,206) | 122937 | 140127 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total investments | 4910800 | 5142589 |
| Cash | 289776 | 335557 |
| Receivables: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Premiums | 571910 | 621740 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Allowance for credit losses on premiums receivable  | (5800) | (6000) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Premiums receivable, net of allowance for credit losses | 566110 | 615740 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued investment income | 52474 | 43299 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other | 11358 | 7600 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total receivables | 629942 | 666639 |
| Reinsurance recoverables | 25895 | 45000 |
| Deferred policy acquisition costs | 266475 | 258259 |
| Fixed assets, net | 171442 | 191332 |
| Operating lease right-of-use assets | 20183 | 31967 |
| Current income taxes | 55136 | 20108 |
| Deferred income taxes | 42903 |  |
| Goodwill | 42796 | 42796 |
| Other intangible assets, net | 9212 | 10255 |
| Other assets | 49628 | 27970 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $6514188 | $6772472 |
| **<u>LIABILITIES AND SHAREHOLDERS' EQUITY</u>** |  |  |
| Loss and loss adjustment expense reserves | $2584910 | $2226430 |
| Unearned premiums | 1545639 | 1519799 |
| Notes payable  | 398330 | 372931 |
| Accounts payable and accrued expenses | 151686 | 169125 |
| Operating lease liabilities | 21924 | 34577 |
| Deferred income taxes |  | 53569 |
| Other liabilities | 289568 | 255760 |
| Shareholders' equity | 1522131 | 2140281 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and shareholders' equity | $6514188 | $6772472 |
| **<u>OTHER INFORMATION</u>** |  |  |
| Common stock shares outstanding | 55371 | 55371 |
| Book value per share | $27.49 | $38.65 |
| Statutory surplus <sup>(a)</sup> | $1.50 billion | $1.83 billion |
| Net premiums written to surplus ratio <sup>(a)</sup> | 2.65 | 2.11 |
| Debt to total capital ratio <sup>(b)</sup> | 20.8% | 14.9% |
| Portfolio duration (including all short-term instruments) <sup>(a)(c)</sup> | 3.5 years | 3.4 years |
| Policies-in-force (company-wide "PIF") <sup>(a)</sup> |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Personal Auto PIF | 1101 | 1122 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Homeowners PIF | 736 | 705 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commercial Auto PIF | 39 | 39 |

---

(a) Unaudited.

(b) Debt to Debt plus Shareholders' Equity (Debt at face value).

(c) Modified duration reflecting anticipated early calls.

---

| | | | | |
|:---|:---|:---|:---|:---|
| **SUPPLEMENTAL SCHEDULES** |  |  |  |  |
| (000's except per-share amounts and ratios)<br>(unaudited) |  |  |  |  |
|  | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Twelve Months Ended December 31,** | **Twelve Months Ended December 31,** |
|  | **2022** | **2021** | **2022** | **2021** |
| <u>Reconciliations of Comparable GAAP Measures to Operating Measures</u> <sup>(a)</sup> | <u>Reconciliations of Comparable GAAP Measures to Operating Measures</u> <sup>(a)</sup> | <u>Reconciliations of Comparable GAAP Measures to Operating Measures</u> <sup>(a)</sup> | <u>Reconciliations of Comparable GAAP Measures to Operating Measures</u> <sup>(a)</sup> |  |
| Net premiums earned | $1005482 | $958266 | $3952482 | $3741948 |
| Change in net unearned premiums | (89732) | (25588) | 25535 | 113421 |
| Net premiums written | $915750 | $932678 | $3978017 | $3855369 |
| Incurred losses and loss adjustment expenses | $926045 | $778637 | $3362219 | $2760155 |
| Change in net loss and loss adjustment expense reserves  | (151268) | (94360) | (374536) | (248208) |
| Paid losses and loss adjustment expenses | $774777 | $684277 | $2987683 | $2511947 |
| Net (loss) income | $(6770) | $30473 | $(512672) | $247937 |
| Less: Net realized investment gains (losses) | 93158 | 54705 | (488080) | 111658 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tax on net realized investment gains (losses) <sup>(b)</sup> | 19563 | 11488 | (102497) | 23448 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net realized investment gains (losses), net of tax | 73595 | 43217 | (385583) | 88210 |
| Operating (loss) income | $(80365) | $(12744) | $(127089) | $159727 |
| Per diluted share: |  |  |  |  |
| Net (loss) income | $(0.12) | $0.55 | $(9.26) | $4.48 |
| Less: Net realized investment gains (losses), net of tax | 1.33 | 0.78 | (6.96) | 1.59 |
| Operating (loss) income <sup>(c)</sup> | $(1.45) | $(0.23) | $(2.30) | $2.88 |
| Combined ratio |  |  | 108.7% | 98.3% |
| Effect of estimated prior periods' loss development |  |  | (1.2) % | 0.7% |
| Combined ratio-accident period basis |  |  | 107.5% | 99.0% |

---

(a) See "Information Regarding GAAP and Non-GAAP Measures" on page 7. 

(b) Based on federal statutory rate of 21%.

(c) Operating income per diluted share for the twelve months ended December 31, 2021 does not sum due to rounding.

**Information Regarding GAAP and Non-GAAP Measures**

The Company has presented information within this document containing operating measures which in management's opinion provide investors with useful, industry specific information to help them evaluate, and perform meaningful comparisons of, the Company's performance, but that may not be presented in accordance with GAAP. These measures are not intended to replace, and should be read in conjunction with, the GAAP financial results.

**Net income** is the GAAP measure that is most directly comparable to operating income. **Operating income** is net income excluding realized investment gains and losses, net of tax. Operating income is used by management along with the other components of net income to assess the Company's performance. Management uses operating income as an important measure to evaluate the results of the Company's insurance business. Management believes that operating income provides investors with a valuable measure of the Company's ongoing performance as it reveals trends in the Company's insurance business that may be obscured by the effect of net realized investment gains and losses. Realized investment gains and losses may vary significantly between periods and are generally driven by external economic developments such as capital market conditions. Accordingly, operating income highlights the results from ongoing operations and the underlying profitability of the Company's core insurance business. Operating income, which is provided as supplemental information and should not be considered as a substitute for net income, does not reflect the overall profitability of the Company's business. It should be read in conjunction with the GAAP financial results. See "Supplemental Schedules" above for a reconciliation of net income to operating income.

**Net premiums earned**, the most directly comparable GAAP measure to net premiums written, represents the portion of premiums written that is recognized as revenue in the financial statements for the periods presented and earned on a pro-rata basis over the term of the policies. **Net premiums written** is a statutory financial measure which represents the premiums charged on policies issued during a fiscal period less any applicable reinsurance. Net premiums written is designed to determine production levels and is meant as supplemental information and not intended to replace net premiums earned. Such information should be read in conjunction with the GAAP financial results. See "Supplemental Schedules" above for a reconciliation of net premiums earned to net premiums written.

**Incurred losses and loss adjustment expenses** is the most directly comparable GAAP measure to paid losses and loss adjustment expenses. **Paid losses and loss adjustment expenses** excludes the effects of changes in the loss reserve accounts. Paid losses and loss adjustment expenses is provided as supplemental information and is not intended to replace incurred losses and loss adjustment expenses. It should be read in conjunction with the GAAP financial results. See "Supplemental Schedules" above for a reconciliation of incurred losses and loss adjustment expenses to paid losses and loss adjustment expenses.

**Combined ratio** is the most directly comparable measure to combined ratio-accident period basis. **Combined ratio-accident period basis** is computed as the difference between two GAAP operating ratios: the combined ratio and prior accident periods' loss development ratio. Management believes that combined ratio-accident period basis is useful to investors and it is used to reveal the trends in the Company's results of operations that may be obscured by development on prior accident periods' loss reserves. Combined ratio-accident period basis is meant as supplemental information and is not intended to replace the GAAP combined ratio. It should be read in conjunction with the GAAP financial results. See "Supplemental Schedules" above for a reconciliation of GAAP combined ratio to combined ratio-accident period basis.

![](mcy-ex99_1i0.jpg)

FOR MORE INFORMATION, CONTACT: Theodore Stalick, SVP/CFO, (323) 937-1060, www.mercuryinsurance.com