MERCURY GENERAL CORP

Previous wording

The following tables present direct premiums written, by state and line of insurance business, for the six months ended June 30, 2026 and 2025:

Current wording

The following tables present direct premiums written, by state and line of insurance business, for the nine months ended September 30, 2026 and 2025:

Previous wording

In January 2025, the California DOI approved a 12% rate increase on the California homeowners line of insurance business. This rate increase became effective in March 2025. In December 2025, the California DOI approved a 6.9% rate increase on the California homeowners line of insurance business. This rate increase became effective in July 2026. The California homeowners line of insurance business represented approximately 18% of the Company's total net premiums earned for the six months ended June 30, 2026. In addition, the Company intends to file an application with the California DOI in August 2026 for a rate increase of approximately 6% on the California private passenger automobile line of insurance business with a July 2027 effective date. The California private passenger automobile line of insurance business represented approximately 53% of the Company's total net premiums earned for the six months ended June 30, 2026.

Current wording

In January 2025, the California DOI approved a 12% rate increase on the California homeowners line of insurance business. This rate increase became effective in March 2025. In December 2025, the California DOI approved a 6.9% rate increase on the California homeowners line of insurance business. This rate increase became effective in July 2026. The California homeowners line of insurance business represented approximately 18% of the Company's total net premiums earned for the nine months ended September 30, 2026. In addition, the Company filed an application with the California DOI in August 2026 for a rate increase of approximately 5.7% on the California private passenger automobile line of insurance business with a July 2027 effective date. The California private passenger automobile line of insurance business represented approximately 52% of the Company's total net premiums earned for the nine months ended September 30, 2026.

Previous wording

At June 30, 2026 and December 31, 2025, the Company recorded its point estimate of approximately $3.67 billion and $3.63 billion ($3.64 billion and $3.60 billion, net of reinsurance), respectively, in loss reserves, which included approximately $2.23 billion and $2.12 billion ($2.23 billion and $2.12 billion, net of reinsurance), respectively, of incurred but not reported loss reserves (“IBNR”). IBNR includes estimates, based upon past experience, of ultimate developed costs, which may differ from case estimates, unreported claims that occurred on or prior to June 30, 2026 and December 31, 2025, and estimated future payments for reopened claims. Management believes that the liability for loss reserves is adequate to cover the ultimate net cost of losses and loss adjustment expenses incurred to date; however, since the provisions are necessarily based upon estimates, the ultimate liability may be more or less than such provisions.

Current wording

At September 30, 2026 and December 31, 2025, the Company recorded its point estimate of approximately $3.75 billion and $3.63 billion ($3.72 billion and $3.60 billion, net of reinsurance), respectively, in loss reserves, which included approximately $2.33 billion and $2.12 billion ($2.33 billion and $2.12 billion, net of reinsurance), respectively, of incurred but not reported loss reserves (“IBNR”). IBNR includes estimates, based upon past experience, of ultimate developed costs, which may differ from case estimates, unreported claims that occurred on or prior to September 30, 2026 and December 31, 2025, and estimated future payments for reopened claims. Management believes that the liability for loss reserves is adequate to cover the ultimate net cost of losses and loss adjustment expenses incurred to date; however, since the provisions are necessarily based upon estimates, the ultimate liability may be more or less than such provisions.

Previous wording

Net premiums earned and net premiums written for the three months ended June 30, 2026 increased 9.6% and 5.3%, respectively, from the corresponding period in 2025. The increase in net premiums earned was primarily due to a rate increase in the California homeowners line of insurance business and increases in the number of policies written in the California automobile and homeowners lines of insurance business, partially offset by an increase in ceded premiums earned. The increase in net premiums written was primarily due to increases in the number of policies written in the California automobile and homeowners lines of insurance business, partially offset by an increase in ceded premiums written.

Current wording

Net premiums earned and net premiums written for the three months ended September 30, 2026 increased 9.6% and 9.2%, respectively, from the corresponding period in 2025. The increases in net premiums earned and net premiums written were primarily due to a rate increase in the California homeowners line of insurance business and increases in the number of policies written in the California automobile and homeowners lines of insurance business.

Previous wording

Loss ratio is calculated by dividing losses and loss adjustment expenses by net premiums earned. The loss ratio for the second quarter of 2026 and 2025 was affected by favorable development of approximately $35 million and unfavorable development of approximately $4 million, respectively, on prior accident years' loss and loss adjustment expense reserves. The favorable development for the second quarter of 2026 was primarily attributable to lower than estimated losses and loss adjustment expenses in the automobile and homeowners lines of insurance business. The unfavorable development for the second quarter of 2025 was not significant and resulted from ongoing analyses of loss trends.

Current wording

Loss ratio is calculated by dividing losses and loss adjustment expenses by net premiums earned. The loss ratio for the third quarter of 2026 and 2025 was affected by favorable development of approximately $58 million and $27 million, respectively, on prior accident years' loss and loss adjustment expense reserves. The favorable development for the third quarters of 2026 and 2025 was primarily attributable to lower than estimated losses and loss adjustment expenses in the automobile line of insurance business.

Previous wording

In addition, the 2026 loss ratio was negatively impacted by approximately $71 million of catastrophe losses net of reinsurance, excluding unfavorable development of approximately $4 million on prior years' catastrophe losses, primarily due to storms in Texas and Oklahoma. The 2025 loss ratio was negatively impacted by approximately $15 million of catastrophe losses, excluding favorable development of approximately $2 million on prior years' catastrophe losses, primarily due to storms in Texas and Oklahoma.

Current wording

In addition, the 2026 loss ratio was negatively impacted by approximately $19 million of catastrophe losses net of reinsurance, excluding unfavorable development of approximately $4 million on prior years' catastrophe losses, primarily due to storms in Oklahoma and Texas. The 2025 loss ratio was negatively impacted by approximately $33 million of catastrophe losses, excluding favorable development of approximately $4 million on prior years' catastrophe losses, primarily due to an increase in estimated net losses and loss adjustment expenses on the Palisades and Eaton wildfires in the third quarter of 2025.

Previous wording

Excluding the effects of estimated prior accident years’ loss development and catastrophe losses, the loss ratio was 62.6% and 67.4% for the second quarter of 2026 and 2025, respectively. The decrease in the loss ratio was primarily due to the rate increase discussed above and a decrease in loss frequency in the private passenger automobile line of insurance business, partially offset by an increase in loss severity in the private passenger automobile line of insurance business.

Current wording

Excluding the effects of estimated prior accident years’ loss development and catastrophe losses, the loss ratio was 68.3% and 62.2% for the third quarter of 2026 and 2025, respectively. The increase in the loss ratio was primarily due to an increase in loss severity in the private passenger automobile line of insurance business, partially offset by a rate increase in the California homeowners line of insurance business.

Previous wording

Expense ratio is calculated by dividing the sum of policy acquisition costs and other operating expenses by net premiums earned. The expense ratio for the three months ended June 30, 2026 increased from the corresponding period in 2025, which was largely attributable to increases in profitability-based accruals and advertising expenses, partially offset by the rate increase discussed above.

Current wording

Expense ratio is calculated by dividing the sum of policy acquisition costs and other operating expenses by net premiums earned. The expense ratio for the three months ended September 30, 2026 did not change from the corresponding period in 2025.

Previous wording

Income tax expense was $63.8 million and $40.3 million for the three months ended June 30, 2026 and 2025, respectively. The increase in income tax expense was primarily due to a $120.6 million increase in total pre-tax income. The Company’s effective income tax rate can be affected by several factors. These generally relate to large changes in the composition of fully taxable income, including net realized investment gains or losses, tax-exempt investment income, non-deductible expenses, and periodically, non-routine tax items such as adjustments to unrecognized tax benefits related to tax uncertainties. Income tax expense of $63.8 million on pre-tax income of $327.3 million, including tax-exempt investment income of $34.5 million, resulted in an effective tax rate of 19.5%, below the statutory tax rate of 21%, for the three months ended June 30, 2026, and income tax expense of $40.3 million on pre-tax income of $206.7 million, including tax-exempt investment income of $22.7 million, resulted in an effective tax rate of 19.5% for the corresponding period in 2025.

Current wording

Income tax (benefit) expense was $(9.2) million and $69.9 million for the three months ended September 30, 2026 and 2025, respectively. The decrease in income tax expense was primarily due to a $373.2 million decrease in total pre-tax income. The Company’s effective income tax rate can be affected by several factors. These generally relate to large changes in the composition of fully taxable income, including net realized investment gains or losses, tax-exempt investment income, non-deductible expenses, and periodically, non-routine tax items such as adjustments to unrecognized tax benefits related to tax uncertainties. Income tax benefit of $9.2 million on pre-tax loss of $22.9 million, including tax-exempt investment income of $37.9 million, resulted in an effective tax rate of 40.2%, above the statutory tax rate of 21%, for the three months ended September 30, 2026, and income tax expense of $69.9 million on pre-tax income of $350.3 million, including tax-exempt investment income of $26.5 million, resulted in an effective tax rate of 20.0%, below the statutory tax rate, for the corresponding period in 2025.

Previous wording

(2)Net investment income includes approximately $11.9 million and $12.5 million of interest income earned on cash (approximately $9.4 million and $9.9 million after tax) for the three months ended June 30, 2026 and 2025, respectively. Average annual yield on investments does not include interest income earned on cash.

Current wording

(2)Net investment income includes approximately $12.0 million and $12.9 million of interest income earned on cash (approximately $9.5 million and $10.2 million after tax) for the three months ended September 30, 2026 and 2025, respectively. Average annual yield on investments does not include interest income earned on cash.

Previous wording

The following tables present the components of net realized investment gains or losses included in net income:

Current wording

The following tables present the components of net realized investment gains or losses included in net (loss) income:

Previous wording

(2)The increase in fair value of fixed maturity securities for the second quarter of 2026 primarily resulted from the improvement in overall market conditions affecting fixed maturity securities. The decrease in fair value of fixed maturity securities for the second quarter of 2025 primarily resulted from increases in certain long-term market interest rates.

Current wording

(2)The decrease in fair value of fixed maturity securities for the third quarter of 2026 primarily resulted from increases in overall market interest rates. The increase in fair value of fixed maturity securities for the third quarter of 2025 primarily resulted from decreases in overall market interest rates.

Previous wording

(3)The increase in fair value of equity securities for the first half of 2026 primarily resulted from the overall improvement in equity markets. The decrease in fair value of equity securities for the first half of 2025 primarily resulted from the decline in equity markets associated with the Company's equity securities.

Current wording

(3)The decrease in fair value of equity securities for the third quarter of 2026 primarily resulted from the decline in equity markets associated with the Company's equity securities. The increase in fair value of equity securities for the third quarter of 2025 primarily resulted from the overall improvement in equity markets

Previous wording

Net premiums earned and net premiums written for the six months ended June 30, 2026 increased 11.3% and 11.2%, respectively, from the corresponding period in 2025. The increases in net premiums earned and net premiums written were primarily due to a rate increase in the California homeowners line of insurance business and increases in the number of policies written in the California automobile and homeowners lines of insurance business, combined with decreases in ceded premiums earned and ceded premiums written.

Current wording

Net premiums earned and net premiums written for the nine months ended September 30, 2026 increased 10.7% and 10.5%, respectively, from the corresponding period in 2025. The increases in net premiums earned and net premiums written were primarily due to rate increases in the California homeowners line of insurance business and increases in the number of policies written in the California automobile and homeowners lines of insurance business, combined with decreases in ceded premiums earned and ceded premiums written.

Previous wording

Net premiums earned included ceded premiums earned of $125.2 million and $161.1 million for the six months ended June 30, 2026 and 2025, respectively. Net premiums written included ceded premiums written of $125.1 million and $160.7 million for the six months ended June 30, 2026 and 2025, respectively. The decreases in ceded premiums earned and written resulted mostly from reinstatement premiums earned and written of $101 million in the first half of 2025 under the Treaty ended June 30, 2025 related to reinstating the fully exhausted reinsurance coverage layers following the Palisades and Eaton wildfires, partially offset by an increase in the annual reinsurance premium under the Treaty due to higher reinsurance coverage and rates and growth in the covered book of business.

Current wording

Net premiums earned included ceded premiums earned of $186.8 million and $224.3 million for the nine months ended September 30, 2026 and 2025, respectively. Net premiums written included ceded premiums written of $187.1 million and $224.2 million for the nine months ended September 30, 2026 and 2025, respectively. The decreases in ceded premiums earned and written resulted mostly from reinstatement premiums earned and written of $101 million in the first half of 2025 under the Treaty ended June 30, 2025 related to reinstating the fully exhausted reinsurance coverage layers following the Palisades and Eaton wildfires, partially offset by an increase in the annual reinsurance premium under the Treaty ended June 30, 2026 compared to the Treaty ended June 30, 2025 due to higher reinsurance coverage and rates and growth in the covered book of business.

Previous wording

The loss ratio for the first half of 2026 and 2025 was affected by favorable development of approximately $44 million and $47 million, respectively, on prior accident years' loss and loss adjustment expense reserves. The favorable development for the first half of 2026 was primarily attributable to lower than estimated losses and loss adjustment expenses in the automobile line of insurance business, partially offset by adverse development on the homeowners line of insurance business. The favorable development for the first half of 2025 was primarily attributable to lower than estimated losses and loss adjustment expenses in the private passenger automobile and homeowners lines of insurance business.

Current wording

The loss ratio for the nine months ended September 30, 2026 and 2025 was affected by favorable development of approximately $102 million and $74 million, respectively, on prior accident years' loss and loss adjustment expense reserves. The favorable development for the nine months ended September 30, 2026 was primarily attributable to lower than estimated losses and loss adjustment expenses in the automobile line of insurance business, partially offset by adverse development on the homeowners line of insurance business. The favorable development for the nine months ended September 30, 2025 was primarily attributable to lower than estimated losses and loss adjustment expenses in the automobile and homeowners lines of insurance business.

Previous wording

In addition, the 2026 loss ratio was negatively impacted by approximately $107 million of catastrophe losses net of reinsurance, primarily due to storms in Texas and Oklahoma, excluding unfavorable development of approximately $61 million on prior years' catastrophe losses resulting primarily from the Palisades and Eaton wildfires. The 2025 loss ratio was negatively impacted by approximately $474 million of catastrophe losses, excluding favorable development of approximately $14 million on prior years' catastrophe losses, primarily due to the Palisades and Eaton wildfires in California and storms in Texas and Oklahoma.

Current wording

In addition, the 2026 loss ratio was negatively impacted by approximately $126 million of catastrophe losses net of reinsurance, excluding unfavorable development of approximately $65 million on prior years' catastrophe losses largely related to the Palisades and Eaton wildfires, primarily due to storms in Oklahoma and Texas. The 2025 loss ratio was negatively impacted by approximately $507 million of catastrophe losses, excluding favorable development of approximately $18 million on prior years' catastrophe losses, primarily due to the Palisades and Eaton wildfires in California and storms in Texas and Oklahoma.

Previous wording

Excluding the effects of estimated prior accident years’ loss development and catastrophe losses, the loss ratio was 62.5% and 65.4% for the first half of 2026 and 2025, respectively. The decrease in the loss ratio was primarily due to the rate increase and the decrease in ceded premiums earned that are discussed above, partially offset by an increase in loss severity in the private passenger automobile line of insurance business.

Current wording

Excluding the effects of estimated prior accident years’ loss development and catastrophe losses, the loss ratio was 64.5% and 64.3% for the nine months ended September 30, 2026 and 2025, respectively. The increase in the loss ratio was primarily due to an increase in loss severity in the private passenger automobile line of insurance business, mostly offset by rate increases in the California homeowners line of insurance business and the decrease in ceded premiums earned that is discussed above.

Previous wording

The expense ratio for the six months ended June 30, 2026 increased from the corresponding period in 2025, which was largely attributable to increases in profitability-based accruals and advertising expenses, partially offset by the rate increase and the decrease in ceded premiums earned that are discussed above.

Current wording

The expense ratio for the nine months ended September 30, 2026 increased from the corresponding period in 2025, which was largely attributable to increases in profitability-based accruals, partially offset by the rate increases and the decrease in ceded premiums earned that are discussed above.

Previous wording

Income tax expense was $109.1 million and $6.3 million for the six months ended June 30, 2026 and 2025, respectively. The increase in income tax expense was primarily due to a $498.5 million increase in total pre-tax income. Income tax expense of $109.1 million on pre-tax income of $563.0 million, including tax-exempt investment income of $66.2 million, resulted in an effective tax rate of 19.4%, below the statutory tax rate of 21%, for the six months ended June 30, 2026, and income tax expense of $6.3 million on pre-tax income of $64.5 million, including tax-exempt investment income of $43.6 million, resulted in an effective tax rate of 9.8% for the corresponding period in 2025.

Current wording

Income tax expense was $99.9 million and $76.2 million for the nine months ended September 30, 2026 and 2025, respectively. The increase in income tax expense was primarily due to a $125.3 million increase in total pre-tax income. Income tax expense of $99.9 million on pre-tax income of $540.1 million, including tax-exempt investment income of $104.1 million, resulted in an effective tax rate of 18.5%, below the statutory tax rate of 21%, for the nine months ended September 30, 2026, and income tax expense of $76.2 million on pre-tax income of $414.8 million, including tax-exempt investment income of $70.1 million, resulted in an effective tax rate of 18.4% for the corresponding period in 2025.

Previous wording

(2)Net investment income includes approximately $23.1 million and $25.6 million of interest income earned on cash (approximately $18.2 million and $20.2 million after tax) for the six months ended June 30, 2026 and 2025, respectively. Average annual yield on investments does not include interest income earned on cash.

Current wording

(2)Net investment income includes approximately $35.1 million and $38.4 million of interest income earned on cash (approximately $27.7 million and $30.4 million after tax) for the nine months ended September 30, 2026 and 2025, respectively. Average annual yield on investments does not include interest income earned on cash.

Previous wording

(3)Higher net investment income before and after income taxes for the six months ended June 30, 2026 compared to the corresponding period in 2025 resulted largely from higher average invested assets. Average annual yield on investments before income taxes decreased, primarily due to an increase in tax-exempt investments with lower pre-tax yields, combined with lower yields on floating rate investments resulting from lower short-term market interest rates. Average annual yield on investments after income taxes decreased, primarily due to lower yields on floating rate investments resulting from lower short-term market interest rates.

Current wording

(3)Higher net investment income before and after income taxes for the nine months ended September 30, 2026 compared to the corresponding period in 2025 resulted largely from higher average invested assets, partially offset by decreases in average annual yield on investments and interest income earned on cash before and after taxes. Average annual yield on investments before income taxes decreased, primarily due to an increase in tax-exempt investments with lower pre-tax yields combined with lower yields on floating rate investments resulting from lower short-term market interest rates. Average annual yield on investments after income taxes decreased, primarily due to lower yields on floating rate investments resulting from lower short-term market interest rates.

Previous wording

(2)The increase in fair value of fixed maturity securities for the first half of 2026 primarily resulted from the improvement in overall market conditions affecting the Company's fixed maturity securities. The increase in fair value of fixed maturity securities for the first half of 2025 primarily resulted from decreases in overall long-term market interest rates.

Current wording

(2)The decrease in fair value of fixed maturity securities for the nine months ended September 30, 2026 primarily resulted from increases in overall market interest rates. The increase in fair value of fixed maturity securities for the nine months ended September 30, 2025 primarily resulted from decreases in overall market interest rates.

Previous wording

(3)The increases in fair value of equity securities for the second quarters of 2026 and 2025 primarily resulted from the overall improvement in equity markets.

Current wording

(3)The increases in fair value of equity securities for the nine months ended September 30, 2026 and 2025 primarily resulted from the overall improvement in equity markets.

Previous wording

The Company has generated positive cash flow from operations in each full year since the public offering of its common stock in November 1985. The Company does not attempt to match the duration and timing of asset maturities with those of liabilities; rather, it manages its portfolio with a view towards maximizing total return with an emphasis on after-tax income. With combined cash and short-term investments of $2,069.2 million at June 30, 2026, the Company believes its cash flow from future operations is adequate to satisfy its liquidity requirements. Investment maturities are also available to meet the Company’s liquidity needs. However, the Company operates in a rapidly evolving and often unpredictable business environment that may change the timing or amount of expected future cash receipts and expenditures. Accordingly, there can be no assurance that the Company’s sources of funds will be sufficient to meet its liquidity needs or that the Company will not be required to raise additional funds to meet those needs or for future business expansion, through the sale of equity or debt securities or from credit facilities with lending institutions.

Current wording

The Company has generated positive cash flow from operations in each full year since the public offering of its common stock in November 1985. The Company does not attempt to match the duration and timing of asset maturities with those of liabilities; rather, it manages its portfolio with a view towards maximizing total return with an emphasis on after-tax income. With combined cash and short-term investments of $1,531.9 million at September 30, 2026, the Company believes its cash flow from future operations is adequate to satisfy its liquidity requirements. Investment maturities are also available to meet the Company’s liquidity needs. However, the Company operates in a rapidly evolving and often unpredictable business environment that may change the timing or amount of expected future cash receipts and expenditures. Accordingly, there can be no assurance that the Company’s sources of funds will be sufficient to meet its liquidity needs or that the Company will not be required to raise additional funds to meet those needs or for future business expansion, through the sale of equity or debt securities or from credit facilities with lending institutions.

Previous wording

Net cash provided by operating activities for the six months ended June 30, 2026 was $543.3 million, an increase of $240.4 million from the corresponding period in 2025. The increase was primarily due to an increase in premium collections and a decrease in payments for losses and loss adjustment expenses, net of reinsurance, partially offset by increases in payments for operating expenses and income taxes. The Company utilized the cash provided by operating activities during the six months ended June 30, 2026 primarily for the net purchases of investment securities and payment of dividends to its shareholders.

Current wording

Net cash provided by operating activities for the nine months ended September 30, 2026 was $930.7 million, an increase of $131.4 million from the corresponding period in 2025. The increase was primarily due to an increase in premium collections and a decrease in payments for losses and loss adjustment expenses, net of reinsurance, partially offset by increases in payments for income taxes and operating expenses. The Company utilized the cash provided by operating activities during the nine months ended September 30, 2026 primarily for the net purchases of investment securities and payment of dividends to its shareholders.

Previous wording

The Company is the assuming reinsurer under a Catastrophe Portfolio Participation Reinsurance Contract (the "Contract") effective through December 31, 2028. The Company reimburses a group of affiliates of a ceding company for a proportional share of a portfolio of catastrophe losses based on the premiums ceded to the Company under the Contract, to the extent the actual loss ratio exceeds the threshold loss ratio of 73.5%. The total assumed premium under the Contract is $15.0 million for each of the 12-month periods ending December 31, 2025 through 2028. The total possible amount of losses for the Company under the Contract is $30.0 million for each of the 12-month periods ending December 31, 2025 through 2028. The Company recognized incurred losses of approximately $1.1 million and $(0.4) million for the three months ended June 30, 2026 and 2025, respectively, and $(4.1) million and $(2.0) million for the six months ended June 30, 2026 and 2025, respectively, under the Contract. The negative incurred losses for the three months ended June 30, 2025 and the six months ended June 30, 2026 and 2025 resulted primarily from favorable development on prior years' catastrophe losses that had previously been ceded to the Company under the Contract.

Current wording

The Company is the assuming reinsurer under a Catastrophe Portfolio Participation Reinsurance Contract (the "Contract") effective through December 31, 2028. The Company reimburses a group of affiliates of a ceding company for a proportional share of a portfolio of catastrophe losses based on the premiums ceded to the Company under the Contract, to the extent the actual loss ratio exceeds the threshold loss ratio of 73.5%. The total assumed premium under the Contract is $15.0 million for each of the 12-month periods ending December 31, 2025 through 2028. The total possible amount of losses for the Company under the Contract is $30.0 million for each of the 12-month periods ending December 31, 2025 through 2028. The Company recognized incurred losses of approximately $(2.5) million and $(0.8) million for the nine months ended September 30, 2026 and 2025, respectively, under the Contract. The negative incurred losses for the nine months ended September 30, 2026 and 2025 resulted primarily from favorable development on prior years' catastrophe losses that were ceded to the Company under the Contract.

Previous wording

The Company is the assuming reinsurer under a Property Quota Share Reinsurance Contract ("Quota Share Contract") effective through December 31, 2026 and reimburses ceding companies for a proportional share of losses based on the premiums ceded to the Company under the Quota Share Contract. The total annual assumed premium under the Quota Share Contract is approximately $17 million and $11 million for the 12 months ending December 31, 2026 and 2025, respectively. The total annual possible amount of losses that can be ceded to the Company under the Quota Share Contract is approximately $60 million and $32 million for the 12 months ending December 31, 2026 and 2025, respectively. The Company recognized incurred losses of approximately $3.4 million and $2.1 million for the three months ended June 30, 2026 and 2025, respectively, and $6.9 million and $4.2 million for the six months ended June 30, 2026 and 2025, respectively, under the Quota Share Contract.

Current wording

The Company is the assuming reinsurer under a Property Quota Share Reinsurance Contract ("Quota Share Contract") effective through December 31, 2026 and reimburses ceding companies for a proportional share of losses based on the premiums ceded to the Company under the Quota Share Contract. The total annual assumed premium under the Quota Share Contract is approximately $17 million and $11 million for the 12 months ending December 31, 2026 and 2025, respectively. The total annual possible amount of losses that can be ceded to the Company under the Quota Share Contract is approximately $60 million and $32 million for the 12 months ending December 31, 2026 and 2025, respectively. The Company recognized incurred losses of approximately $10.3 million and $6.2 million for the nine months ended September 30, 2026 and 2025, respectively, under the Quota Share Contract.

Previous wording

The Company is the assuming reinsurer under a Catastrophe Quota Share Reinsurance Agreement ("Quota Share Agreement") effective through December 31, 2026 and reimburses ceding companies for a proportional share of losses based on the premiums ceded to the Company under the Quota Share Agreement. The total assumed premium under the Quota Share Agreement is approximately $5 million for the 12 months ending December 31, 2026. The total possible amount of losses for the Company under the Quota Share Agreement is approximately $12 million for the 12 months ending December 31, 2026. The Company recognized incurred losses of approximately $0.5 million and $1.9 million for the three and six months ended June 30, 2026, respectively, under the Quota Share Agreement. The Quota Share Agreement commenced on January 1, 2026.

Current wording

The Company is the assuming reinsurer under a Catastrophe Quota Share Reinsurance Agreement ("Quota Share Agreement") effective through December 31, 2026 and reimburses ceding companies for a proportional share of losses based on the premiums ceded to the Company under the Quota Share Agreement. The total assumed premium under the Quota Share Agreement is approximately $5 million for the 12 months ending December 31, 2026. The total possible amount of losses for the Company under the Quota Share Agreement is approximately $12 million for the 12 months ending December 31, 2026. The Company recognized incurred losses of approximately $2.9 million for nine months ended September 30, 2026 under the Quota Share Agreement. The Quota Share Agreement commenced on January 1, 2026.

Previous wording

The Company is the ceding party to a Catastrophe Reinsurance Treaty (the "Treaty") covering a wide range of perils that is effective through June 30, 2027. For the 12 months ending June 30, 2027 and 2026, the Treaty provides approximately $2,790 million and $2,140 million of coverage, respectively, on a per occurrence basis after covered catastrophe losses exceed the Company retention limit of $200 million. The Treaty ending June 30, 2027 and 2026 each excludes coverage for any

Current wording

The Company is the ceding party to a Catastrophe Reinsurance Treaty (the "Treaty") covering a wide range of perils that is effective through June 30, 2027. For the 12 months ending June 30, 2027 and 2026, the Treaty provides approximately $2,790 million and $2,140 million of coverage, respectively, on a per occurrence basis after covered catastrophe losses exceed the Company retention limit of $200 million. The Treaty ending June 30, 2027 and 2026 each excludes coverage for any Florida business and for California earthquake losses on fixed property policies such as homeowners, but does cover losses from fires following an earthquake. The Treaty ending June 30, 2027 and 2026 each includes additional restrictions as noted below. Coverage terms and conditions also vary among various participants in different layers of coverage.

Previous wording

The catastrophe events that occurred in 2026 caused approximately $93 million in losses and loss adjustment expenses to the Company before reinsurance, resulting primarily from storms in Texas and Oklahoma. The catastrophe events that occurred in 2025 caused approximately $1,879 million in losses and loss adjustment expenses to the Company before reinsurance as of June 30, 2026, resulting primarily from the Palisades and Eaton wildfires in California and storms in Texas, Oklahoma and California. Catastrophe losses for the events that occurred in 2025 was reduced by approximately $612 million of subrogation recorded on the Palisades and Eaton wildfires. All of the reinsurance benefits available for the 12 months ended June 30, 2025 under the Treaty, approximately $1,290 million, were used for losses from the Palisades and Eaton wildfires in the first quarter of 2025, and limits totaling $1,238 million were reinstated. See Note 10. Loss and Loss Adjustment Expense Reserves of the Notes to Consolidated Financial Statements for additional information. None of the 2025 catastrophe events, other than the Palisades and Eaton wildfires, individually resulted in losses in excess of the Company’s per-occurrence retention limit of $200 million and $150 million under the Treaty for the 12 months ended June 30, 2026 and 2025, respectively.

Current wording

The catastrophe events that occurred in 2026 caused approximately $105 million in losses and loss adjustment expenses to the Company before reinsurance, resulting primarily from storms in Oklahoma and Texas. The catastrophe events that occurred in 2025 caused approximately $1,877 million in losses and loss adjustment expenses to the Company before reinsurance as of September 30, 2026, resulting primarily from the Palisades and Eaton wildfires in California and storms in Texas and Oklahoma. Catastrophe losses for the events that occurred in 2025 was reduced by approximately $612 million of subrogation recorded on the Palisades and Eaton wildfires. All of the reinsurance benefits available for the 12 months ended June 30, 2025 under the Treaty, approximately $1,290 million, were used for losses from the Palisades and Eaton wildfires in the first quarter of 2025, and limits totaling $1,238 million were reinstated. See Note 10. Loss and Loss Adjustment Expense Reserves of the Notes to Consolidated Financial Statements for additional information. None of the 2025 catastrophe events, other than the Palisades and Eaton wildfires, individually resulted in losses in excess of the Company’s per-occurrence retention limit of $200 million and $150 million under the Treaty for the 12 months ended June 30, 2026 and 2025, respectively.

Previous wording

At June 30, 2026, 44.7% of the Company’s total investment portfolio at fair value and 55.1% of its total fixed maturity securities at fair value were invested in tax-exempt state and municipal bonds. Equity holdings consist of non-redeemable preferred stocks, common stocks on which dividend income is partially tax-sheltered by the 50% corporate dividend received deduction, private equity funds, and private equity investment which is a direct investment in a private company. At June 30, 2026, 92.7% of short-term investments consisted of highly rated short-duration securities redeemable on a daily or weekly basis.

Current wording

At September 30, 2026, 46.2% of the Company’s total investment portfolio at fair value and 55.6% of its total fixed maturity securities at fair value were invested in tax-exempt state and municipal bonds. Equity holdings consist of non-redeemable preferred stocks, common stocks on which dividend income is partially tax-sheltered by the 50% corporate dividend received deduction, private equity funds, and private equity investment which is a direct investment in a private company. At September 30, 2026, all of the Company's short-term investments consisted of highly rated short-duration securities redeemable on a daily or weekly basis.

Previous wording

Another exposure related to the fixed maturity securities is credit risk, which is managed by maintaining a weighted-average portfolio credit quality rating of AA- and, A+, at fair value, at June 30, 2026 and December 31, 2025, respectively. The Company's municipal bond holdings, of which 85.3% were tax exempt, represented 55.1% of its fixed maturity securities portfolio at June 30, 2026, at fair value, and are broadly diversified geographically. See Part I-Item 3. Quantitative and Qualitative Disclosures About Market Risks for a breakdown of municipal bond holdings by state.

Current wording

Another exposure related to the fixed maturity securities is credit risk, which is managed by maintaining a weighted-average portfolio credit quality rating of AA- and, A+, at fair value, at September 30, 2026 and December 31, 2025, respectively. The Company's municipal bond holdings, of which 86.2% were tax exempt, represented 55.6% of its fixed maturity securities portfolio at September 30, 2026, at fair value, and are broadly diversified geographically. See Part I-Item 3. Quantitative and Qualitative Disclosures About Market Risks for a breakdown of municipal bond holdings by state.

Previous wording

Taxable holdings consist principally of investment grade issues. At June 30, 2026, fixed maturity securities holdings rated below investment grade and non-rated bonds totaled $9.1 million and $24.7 million, respectively, at fair value, and represented 0.2% and 0.4%, respectively, of total fixed maturity securities. At December 31, 2025, fixed maturity securities holdings rated below investment grade and non-rated bonds totaled $10.1 million and $50.6 million, respectively, at fair value, and represented 0.2% and 0.9%, respectively, of total fixed maturity securities.

Current wording

Taxable holdings consist principally of investment grade issues. At September 30, 2026, fixed maturity securities holdings rated below investment grade and non-rated bonds totaled $8.8 million and $28.1 million, respectively, at fair value, and represented 0.1% and 0.5%, respectively, of total fixed maturity securities. At December 31, 2025, fixed maturity securities holdings rated below investment grade and non-rated bonds totaled $10.1 million and $50.6 million, respectively, at fair value, and represented 0.2% and 0.9%, respectively, of total fixed maturity securities.

Previous wording

The overall credit ratings for the Company’s fixed maturity securities portfolio were relatively stable during the six months ended June 30, 2026, with 96.7% of fixed maturity securities at fair value experiencing no change in their overall rating. 2.5% and 0.8% of fixed maturity securities at fair value experienced upgrades and downgrades, respectively, during the six months ended June 30, 2026.

Current wording

The overall credit ratings for the Company’s fixed maturity securities portfolio were relatively stable during the nine months ended September 30, 2026, with 96.4% of fixed maturity securities at fair value experiencing no change in their overall rating. 2.9% and 0.7% of fixed maturity securities at fair value experienced upgrades and downgrades, respectively, during the nine months ended September 30, 2026.

Previous wording

The Company had $14.8 million and $21.5 million, or 0.3% and 0.4% of its fixed maturity securities portfolio, at fair value, in U.S. government bonds at June 30, 2026 and December 31, 2025, respectively. Moody's and Fitch ratings for U.S.

Current wording

The Company had $14.2 million and $21.5 million, or 0.2% and 0.4% of its fixed maturity securities portfolio, at fair value, in U.S. government bonds at September 30, 2026 and December 31, 2025, respectively. Moody's and Fitch ratings for

Previous wording

government-issued debt were Aa1 and AA+, respectively, at June 30, 2026 and December 31, 2025. The modified duration of the U.S. government bonds portfolio reflecting anticipated early calls was 4.4 years and 2.9 years at June 30, 2026 and December 31, 2025, respectively.

Current wording

U.S. government-issued debt were Aa1 and AA+, respectively, at September 30, 2026 and December 31, 2025. The modified duration of the U.S. government bonds portfolio reflecting anticipated early calls was 4.2 years and 2.9 years at September 30, 2026 and December 31, 2025, respectively.

Previous wording

The Company had $3.74 billion and $3.54 billion, or 64.6% and 65.2% of its fixed maturity securities portfolio, at fair value, in municipal securities at June 30, 2026 and December 31, 2025, respectively. At each of June 30, 2026 and December 31, 2025, the weighted-average rating of the Company’s total municipal securities was AA-.14.7% and 18.9% of the Company's municipal securities, at fair value, were subject to federal taxes at June 30, 2026 and December 31, 2025, respectively. The modified duration of the municipal securities portfolio reflecting anticipated early calls was 4.4 years and 4.9 years at June 30, 2026 and December 31, 2025, respectively.

Current wording

The Company had $3.88 billion and $3.54 billion, or 64.5% and 65.2% of its fixed maturity securities portfolio, at fair value, in municipal securities at September 30, 2026 and December 31, 2025, respectively. At each of September 30, 2026 and December 31, 2025, the weighted-average rating of the Company’s total municipal securities was AA-.13.8% and 18.9% of the Company's municipal securities, at fair value, were subject to federal taxes at September 30, 2026 and December 31, 2025, respectively. The modified duration of the municipal securities portfolio reflecting anticipated early calls was 7.1 years and 4.9 years at September 30, 2026 and December 31, 2025, respectively.

Previous wording

At June 30, 2026 and December 31, 2025, $443.2 million and $456.8 million, respectively, of the Company's municipal securities, at fair value, were insured. The Company considers the strength of the underlying credit as a buffer against potential market value declines which may result from future rating downgrades of the bond insurers. In addition, the Company has a long-term time horizon for its municipal bond holdings, which generally allows it to recover the full principal amounts upon maturity and avoid forced sales prior to maturity of bonds that have declined in market value due to the bond insurers’ rating downgrades. Based on the uncertainty surrounding the financial condition of these insurers, it is possible that there will be future downgrades to below investment grade ratings by the rating agencies in the future, and such downgrades could impact the estimated fair value of municipal bonds.

Current wording

At September 30, 2026 and December 31, 2025, $482.0 million and $456.8 million, respectively, of the Company's municipal securities, at fair value, were insured. The Company considers the strength of the underlying credit as a buffer against potential market value declines which may result from future rating downgrades of the bond insurers. In addition, the Company has a long-term time horizon for its municipal bond holdings, which generally allows it to recover the full principal amounts upon maturity and avoid forced sales prior to maturity of bonds that have declined in market value due to the bond insurers’ rating downgrades. Based on the uncertainty surrounding the financial condition of these insurers, it is possible that there will be future downgrades to below investment grade ratings by the rating agencies in the future, and such downgrades could impact the estimated fair value of municipal bonds.

Previous wording

The Company had mortgage-backed securities portfolio of $526.0 million and $297.4 million, or 9.1% and 5.5% of the Company's fixed maturity securities portfolio at fair value, at June 30, 2026 and December 31, 2025, respectively. Substantially all of the Company's mortgage-backed securities portfolio at those dates was categorized as loans to “prime” residential and commercial real estate borrowers. The Company had holdings of $15.9 million and $11.2 million at fair value ($16.3 million and $11.3 million at amortized cost) in commercial mortgage-backed securities at June 30, 2026 and December 31, 2025, respectively.

Current wording

The Company had mortgage-backed securities portfolio of $638.2 million and $297.4 million, or 10.6% and 5.5% of the Company's fixed maturity securities portfolio at fair value, at September 30, 2026 and December 31, 2025, respectively. Substantially all of the Company's mortgage-backed securities portfolio at those dates was categorized as loans to “prime” residential and commercial real estate borrowers. The Company had holdings of $18.4 million and $11.2 million at fair value ($19.1 million and $11.3 million at amortized cost) in commercial mortgage-backed securities at September 30, 2026 and December 31, 2025, respectively.