Company Overview
Mercury General Corporation operates as a provider of personal automobile insurance within the United States, while also offering homeowners, commercial automobile, commercial property, mechanical protection, and umbrella insurance products. The company functions within the Financial Services sector, specifically inside the Insurance - Property & Casualty industry, a classification that defines its role in managing risk and providing capital coverage for policyholders. Its operational scale is substantial, with a market capitalization of $4.76B and annual revenue of $5.99B generated by a workforce of 4,380 employees. These valuation and revenue figures indicate that Mercury General Corporation holds a significant position in the property and casualty insurance landscape, reflecting a mature business model capable of generating nearly $6 billion in top-line revenue while maintaining a market value under $5 billion.
Financial Health
The company reported revenue of $5.99B and net income of $541.09M for the trailing twelve months, while EBITDA stood at $764.56M. The substantial gap between revenue and net income reveals a cost structure where operating expenses, including claims payments and underwriting costs, consume approximately 91% of total revenue before interest and taxes. Free cash flow is reported at $2.52B, a figure that demonstrates strong financial flexibility allowing the company to fund operations, service debt, or return capital without relying heavily on external financing. The company maintains a gross margin of 18.6%, an operating margin of 16.7%, and a profit margin of 9.0%; these levels indicate that the company retains a significant portion of premium income after direct costs and operational overhead, though the profit margin reflects the inherent leverage and expense intensity of the insurance business. In terms of liquidity and leverage, the company holds $1.65B in cash against $588.00M in debt, supported by a debt-to-equity ratio of 24.32, suggesting a balance sheet that is conservatively structured with cash significantly exceeding debt obligations. However, the current ratio of 0.56 indicates that current liabilities exceed current assets, which is a common characteristic in the insurance industry due to the timing differences between premium collection and claims settlement. Return on Equity is 24.8% and Return on Assets is 4.8%, metrics that reveal management is highly effective at generating returns on the shareholders' equity, while the lower ROA reflects the asset-heavy nature of the industry including invested reserves.
Valuation Assessment
The stock carries a P/E Ratio (TTM) of 8.80 and a Forward P/E of 10.75, implying that the market expects earnings to grow sufficiently to justify a higher multiple in the coming year. The price-to-book ratio is 1.97, indicating that the market values the company at nearly twice its book value, which suggests investors are pricing in future growth potential or intangible assets beyond the recorded equity. Alternative valuation metrics include a price-to-sales ratio of 0.80 and an EV/EBITDA of 4.84, which suggest the company is valued at a discount relative to its sales and earnings power compared to broader industry peers. The stock has traded between a 52-week low of $47.06 and a 52-week high of $100.06; based on the available data, the current valuation sits within this historical range, reflecting market volatility and sentiment shifts over the past year. The beta of 0.94 indicates that the stock's price volatility is slightly lower than the broader market, suggesting it moves in tandem with general market trends but with a dampened magnitude of fluctuation.
Growth & Income
Revenue growth is 14.1% year-over-year while earnings growth is 100.9% year-over-year, indicating that earnings are expanding at a significantly faster rate than revenue, which often implies improved underwriting profitability or leverage effects. As a dividend payer, the company offers a dividend yield of 1.5% with a payout ratio of 13.0%, a low payout level that suggests high sustainability given the robust earnings growth and strong cash generation. The low payout ratio confirms that the company retains the majority of its earnings to reinvest into business growth rather than distributing them fully to shareholders. Overall, the company presents a profile of double-digit revenue expansion paired with exceptional earnings acceleration, supported by a conservative debt structure and a sustainable, albeit modest, dividend yield.