Mercury General

The cat losses outweighed the Q1 $15mn reserve charge that resulted from lower-than-estimated losses and loss adjustment expenses in the homeowners’ business.

The downgrades have been implemented due to the group’s significant earnings deterioration in 2022 and declining investment performance.

On Tuesday, the personal auto-focused carrier reported a 10.4-point deterioration in its combined ratio to 115.8%.

The carrier cited inflation, repair and part costs, supply chain issues and labor shortages as the drivers behind an increase in auto loss severity.

Need to Know

The carrier cited inflation, supply chain issues and labor shortages as the drivers behind an increase in auto loss severity and its third-quarter loss ratio compared to Q3 2021.

Pressure on the Californian insurer’s stock mounted this morning after it reported a Q2 11.7-point deterioration in its combined ratio to 106.6% yesterday.

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The California-based carrier, which focuses on personal auto, blamed rising costs for parts and labor, along with medical inflation, for the swing to an underwriting loss.

Mercury Insurance denies allegations that it did not comply with the state’s consumer protection laws.

The sector was hit by a rough first half of 2022, with more to come in the second half of the year.

Insurers could face pressure if interest rate and recession fears intersect with worsening loss cost trends.