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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________ 
FORM 10-K
____________________________ 

☒    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Fiscal Year Ended December 31, 2025
or
☐    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Transition Period from ___________  to ___________
Commission File No. 001-12257
____________________________ 

MERCURY GENERAL CORPORATION
(Exact name of registrant as specified in its charter)
____________________________ 
California95-2211612
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification No.)
4484 Wilshire Boulevard
Los Angeles, California90010
(Address of principal executive offices)(Zip Code)

Registrant’s telephone number, including area code: (323) 937-1060
____________________________ 

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common StockMCYNew York Stock Exchange
Common StockMCYNew York Stock Exchange Texas

Securities registered pursuant to Section 12(g) of the Act:
None
____________________________ 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☒    No  ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No  ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
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. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  ☐    No  ☒

The aggregate market value of the registrant’s common equity held by non-affiliates of the registrant at June 30, 2025 was $1,789,234,305 (which represents 26,570,156 shares of common equity held by non-affiliates multiplied by $67.34, the closing sales price on the New York Stock Exchange for such date, as reported by the Wall Street Journal).

At February 12, 2026, the registrant had issued and outstanding an aggregate of 55,388,627 shares of its Common Stock.
____________________________ 

Documents Incorporated by Reference
Certain information from the registrant’s definitive proxy statement for the 2026 Annual Meeting of Shareholders is incorporated herein by reference into Part III hereof.




MERCURY GENERAL CORPORATION
INDEX TO FORM 10-K
 
 Page
Item 1
Item 1A
Item 1B
Item 1C
  27
Item 2
Item 3
Item 4
Item 5
Item 6
Item 7
Item 7A
Item 8
Item 9
Item 9A
Item 9B
Item 9C
Item 10
Item 11
Item 12
Item 13
Item 14
Item 15
Item 16
S-1


PART I

Item 1.Business

General
Mercury General Corporation ("Mercury General") and its subsidiaries (referred to herein collectively as the "Company") are primarily engaged in writing personal automobile insurance through 12 insurance subsidiaries (referred to herein collectively as the "Insurance Companies") in 11 states, principally California. The Company also writes homeowners, commercial automobile, commercial property, mechanical protection, and umbrella insurance. The Company's insurance policies are mostly sold through independent agents who receive a commission for selling policies. The Company believes that it has thorough underwriting and claims handling processes that, together with its agent relationships, provide the Company with competitive advantages.

The direct premiums written for the years ended December 31, 2025, 2024 and 2023 by state and line of insurance business were:

Year Ended December 31, 2025
(Dollars in thousands)
Private
Passenger  Automobile		HomeownersCommercial
Automobile
Other Lines (2)
Total
California$3,082,828 $1,170,943 $299,586 $356,431 $4,909,788 82.1 %
Texas122,638 214,498 57,696 6,628 401,460 6.7 %
Other states (1)
385,749 245,479 30,098 9,963 671,289 11.2 %
Total$3,591,215 $1,630,920 $387,380 $373,022 $5,982,537 100.0 %
60.0 %27.3 %6.5 %6.2 %100.0 %

Year Ended December 31, 2024
(Dollars in thousands)
Private
Passenger  Automobile		HomeownersCommercial
Automobile
Other Lines (2)
Total
California$2,845,294 $970,054 $280,987 $334,293 $4,430,628 80.5 %
Texas127,808 190,928 62,788 6,824 388,348 7.1 %
Other states (1)
422,722 206,315 43,219 9,603 681,859 12.4 %
Total$3,395,824 $1,367,297 $386,994 $350,720 $5,500,835 100.0 %
61.7 %24.9 %7.0 %6.4 %100.0 %

Year Ended December 31, 2023
(Dollars in thousands)
Private
Passenger  Automobile		HomeownersCommercial
Automobile
Other Lines (2)
Total
California$2,317,678 $813,056 $246,253 $235,735 $3,612,722 79.3 %
Texas123,390 147,854 53,430 5,592 $330,266 7.2 %
Other states (1)
400,714 158,094 46,538 10,154 615,500 13.5 %
Total$2,841,782 $1,119,004 $346,221 $251,481 $4,558,488 100.0 %
62.4 %24.5 %7.6 %5.5 %100.0 %
_____________
(1)    No individual state accounted for more than 5% of total direct premiums written.
(2)    No individual line of insurance business accounted for more than 5% of total direct premiums written.

The Company offers the following types of automobile coverage: collision, property damage, bodily injury ("BI"), comprehensive, personal injury protection ("PIP"), underinsured and uninsured motorist, and other hazards.
1


The Company offers the following types of homeowners coverage: dwelling, liability, personal property, and other coverages.

The following table presents the Company's published maximum limits of coverage:

Insurance typePublished maximum limits of coverage
Private Passenger Automobile - bodily injury (BI)
$500,000 per person; $500,000 per accident (1)
Private Passenger Automobile (combined policy limits)$500,000 per accident
Private Passenger Automobile - property damage
$250,000 per accident (1)
Commercial Automobile (combined policy limits)$1,000,000 per accident
Homeowner property
no maximum (2) (3)
Homeowner liability
$1,000,000 (3)
Commercial property
no maximum (2)
Umbrella liability
$5,000,000 (4)
________
(1) The majority of the Company’s automobile policies have coverage limits that are equal to or less than $100,000 per person and $300,000 per accident for BI and $50,000 per accident for property damage.
(2) The Company has a per-risk reinsurance treaty covering losses of $7.5 million in excess of $7.5 million, and facultative reinsurance coverage for losses above $15 million subject to some coverage limitations for certain commercial property policies with multiple structures.
(3) The majority of the Company’s homeowners policies have liability coverage limits of $300,000 or less, a replacement value of $750,000 or less, and a total insured value of $2,000,000 or less.
(4) The majority of the Company’s umbrella policies have coverage limits of $1,000,000. The commercial umbrella liability is 100% reinsured.

The principal executive offices of Mercury General are located in Los Angeles, California. The home office of the Insurance Companies and the information technology center are located in Brea, California. The Company maintains branch offices in a number of locations in California; Clearwater, Florida; Kennesaw, Georgia; Lake Forest, Illinois; Las Vegas, Nevada; Bridgewater, New Jersey; Melville, New York; Oklahoma City, Oklahoma; Austin, Texas; and Shanghai, China.

Human Capital
The Company had approximately 4,300 employees at December 31, 2025. The Company's employees are critical to its continued success, and it focuses significant attention on attracting and retaining talented and motivated individuals. The Company pays its employees fairly and competitively and offers a wide range of benefits. The Company benchmarks and sets pay ranges based on market data and considers additional factors in compliance with applicable federal and other laws and regulations. Individual goals are set annually for each employee, and attainment of those goals is an element of the employee’s performance assessment. The Company regularly reviews its compensation practices, both in terms of its overall workforce and individual employees, to ensure its pay is fair, equitable and in compliance with applicable federal and other laws and regulations. In addition, the Company reviews its staffing levels periodically to ensure they are aligned with its business needs.

The Company also reviews employee engagement and satisfaction surveys to monitor employee morale and receive feedback on a variety of issues, in order to improve the employee experience and identify opportunities to continually strengthen its culture. The Company devotes extensive resources to employee training and development, including tuition assistance for career-enhancing academic and professional programs. The Company recognizes that its success is based on the talents and dedication of those it employs, and it is highly invested in their success.

The Company is committed to drawing from the largest pools of talent to help find the best people for the Company. All of the Company's employees are expected to exhibit and promote honest, ethical and respectful conduct in the workplace, must adhere to a code of conduct that sets standards for appropriate behavior, and are required to take annual training on preventing, identifying, reporting and stopping any type of unlawful discrimination.

The Company sponsors a wellness program designed to enhance physical, financial and mental well-being for all of its employees, and encourages healthy behaviors through regular communications, educational sessions, voluntary progress tracking, wellness challenges, and other incentives. The vast majority of the Company's employees currently work from home as a result of the "Mercury's My Workplace" policy that allows most of its employees to work from anywhere in the United
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States of America. In addition, Mercury's technology subsidiary, Mercury Shanghai, has approximately 80 employees working at a leased office space in Shanghai, China.

Available Information
The Company’s website address is www.mercuryinsurance.com. The Company's website address is not intended to function as a hyperlink and the information contained on the Company’s website is not, and should not be considered part of, and is not incorporated by reference into, this Annual Report on Form 10-K. The Company makes available on its website its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements, and amendments to such periodic reports and proxy statements (the "SEC Reports") filed with or furnished to the Securities and Exchange Commission (the "SEC") pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after each SEC Report is filed with or furnished to the SEC. In addition, copies of the SEC Reports are available, without charge, upon written request to the Company’s Chief Financial Officer, Mercury General Corporation, 4484 Wilshire Boulevard, Los Angeles, California 90010. The SEC maintains a website at www.sec.gov that contains the SEC Reports that the Company has filed or furnished electronically with the SEC.

Organization
Mercury General, an insurance holding company, is the parent of Mercury Casualty Company, a California automobile insurer founded in 1961 by George Joseph, the Company’s Chairman of the Board of Directors. 

Mercury General conducts its business through the following subsidiaries: 
Insurance CompaniesFormed or
Acquired		A.M. Best
Rating		Primary States
Mercury Casualty Company ("MCC")(1)
1961ACA, AZ, NV, NY, VA
Mercury Insurance Company ("MIC")(1)
1972ACA
California Automobile Insurance Company ("CAIC")(1)
1975ACA
California General Underwriters Insurance Company, Inc. ("CGU")(1)
1985ACA
Mercury Insurance Company of Illinois 1989AIL, NJ
Mercury Insurance Company of Georgia1989AGA
Mercury Indemnity Company of Georgia1991AGA
American Mercury Insurance Company 1996AOK, CA, TX, VA
Mercury Insurance Company of Texas(2)
1996ATX
Mercury County Mutual Insurance Company 2000ATX
Mercury Indemnity Company of America2001AFL, NJ
Orion Indemnity Company ("OIC")(1)
2015ACA
Non-Insurance CompaniesFormed or
Acquired		Purpose
Mercury Select Management Company, Inc.1997Third party administrator for Mechanical Protection service contracts
Mercury Insurance Services LLC2000Management services to subsidiaries
AIS Management LLC 2009Parent company of AIS and PoliSeek
Auto Insurance Specialists LLC ("AIS")2009Insurance agency
PoliSeek AIS Insurance Solutions, Inc. ("PoliSeek")2009Insurance agency
Animas Funding LLC 2013Special purpose investment vehicle
Fannette Funding LLC 2014Special purpose investment vehicle
Mercury Plus Insurance Services LLC2018Insurance agency
Mercury Information Technology Services LLC2023Parent company of Mercury Shanghai
Mercury (Shanghai) Information Technology Services Co., Ltd. ("Mercury Shanghai")2024Software development and related technical services to other subsidiaries
Upper Animas Holdings LLC 2024Special purpose investment vehicle
_____________
(1)The term "California Companies" refers to MCC, MIC, CAIC, CGU, and OIC.
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(2)Effective August 13, 2025, American Mercury Lloyds Insurance Company was converted from a Lloyd's plan to a stock company and changed the company name to Mercury Insurance Company of Texas.

Production and Servicing of Business
The Company sells its policies through a network of approximately 8,510 independent agents, its 100% owned insurance agencies, AIS and PoliSeek, and directly through internet sales portals. Approximately 2,670, 1,140, and 1,910 of the independent agents are located in California, Florida, and Texas, respectively. The independent agents and agencies are independent contractors selected and contracted by the Company and generally also represent competing insurance companies. Certain of these independent agencies are under the common ownership of a parent company; however, they each operate autonomously with their own contractual agreements with the Company and hence are accounted for as separate independent agencies. Excluding AIS and PoliSeek, independent agents and agencies collectively accounted for approximately 88% of the Company's direct premiums written in 2025 and no single independent agent or agency accounted for more than 3.0% of the Company’s direct premiums written during any of the last three years. AIS and PoliSeek represented the Company as independent agencies prior to their acquisition in 2009, and continue to act as independent agencies selling policies for a number of other insurance companies. Policies sold directly through the internet sales portals are assigned to and serviced by the Company's agents and agencies, including AIS and PoliSeek. In 2025, the Company invested in and expanded its independent agent network through various distribution partnerships.

The Company believes that it compensates its agents above the industry average. Net commissions incurred in 2025 were approximately 15% of net premiums written.

The Company’s advertising budget is allocated among television, radio, newspaper, internet, and direct mailing media with the intent to provide the best coverage available within targeted media markets. While the majority of these advertising costs are borne by the Company, a portion of these costs are reimbursed by the Company’s independent agents based upon the number of account leads generated by the advertising. The Company believes that its advertising program is important to generate leads and create brand awareness. In 2025, the Company incurred approximately $32 million in net advertising expense.

Underwriting
The Company sets its own automobile insurance premium rates, subject to rating regulations issued by the Department of Insurance or similar governmental agency of each state in which it is licensed to operate ("DOI"). Each state has different rate approval requirements. See "Regulation—Department of Insurance Oversight."

The Company offers standard, non-standard, and preferred private passenger automobile insurance in 11 states. The Company also offers homeowners insurance in 10 states, commercial automobile insurance in 4 states, and mechanical protection insurance in most states.

In California, "good drivers," as defined by the California Insurance Code, accounted for approximately 85% of the Company's California voluntary private passenger automobile policies-in-force at December 31, 2025, while higher risk categories accounted for approximately 15%. The Company's private passenger automobile renewal rate in California (the rate of acceptance of offers to renew) averaged approximately 99%, 99%, and 95% in 2025, 2024, and 2023, respectively.

Claims
The Company conducts the majority of claims processing without the assistance of outside adjusters. The claims staff administers all claims and manages all legal and adjustment aspects of claims processing.

Loss and Loss Adjustment Expense Reserves ("Loss Reserves") and Reserve Development
The Company maintains loss reserves for both reported and unreported claims. Loss reserves for reported claims are estimated based upon a case-by-case evaluation of the type of claim involved and the expected development of such claims. Loss reserves for unreported claims are determined on the basis of historical information by line of insurance business. Inflation is reflected in the reserving process through analysis of cost trends and review of historical reserve settlement.

The Company’s ultimate liability may be greater or less than management estimates of reported loss reserves. The Company does not discount to a present value that portion of loss reserves expected to be paid in future periods. However, the Company is required to discount loss reserves for federal income tax purposes.

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The following table provides a reconciliation of beginning and ending estimated reserve balances for the years indicated:

RECONCILIATION OF NET LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES
 Year Ended December 31,
 202520242023
 (Amounts in thousands)
Gross reserves at January 1(1)
$3,152,031 $2,785,702 $2,584,910 
Reinsurance recoverables on unpaid losses(28,645)(32,148)(25,323)
Net reserves at January 1(1)
3,123,386 2,753,554 2,559,587 
Incurred losses and loss adjustment expenses related to:
Current year4,055,014 3,659,724 3,553,801 
Prior years(91,983)24,787 (35,948)
Total incurred losses and loss adjustment expenses3,963,031 3,684,511 3,517,853 
Loss and loss adjustment expense payments related to:
Current year2,060,739 1,963,076 2,080,690 
Prior years1,426,348 1,351,603 1,243,196 
Total payments3,487,087 3,314,679 3,323,886 
Net reserves at December 31(1)
3,599,330 3,123,386 2,753,554 
Reinsurance recoverables on unpaid losses34,008 28,645 32,148 
Gross reserves at December 31(1)
$3,633,338 $3,152,031 $2,785,702 
_____________ 
(1)Under statutory accounting principles ("SAP"), reserves are stated net of reinsurance recoverables on unpaid losses whereas under U.S. generally accepted accounting principles ("GAAP"), reserves are stated gross of reinsurance recoverables on unpaid losses.

The severe inflationary trend of 2022 continued into 2023, but moderated as the year progressed. During 2024 and 2025, the inflation rate continued to be moderate for automobile parts and labor but it was at an elevated level for bodily injury costs.

The decrease in the provision for insured events of prior years in 2025 of approximately $92.0 million primarily resulted from lower than estimated losses and loss adjustment expenses in the automobile and homeowners lines of insurance business, including favorable development on the prior years' catastrophe losses. The increase in the provision for insured events of prior years in 2024 of approximately $24.8 million primarily resulted from higher than estimated losses and loss adjustment expenses in the commercial automobile and commercial property lines of insurance business, partially offset by favorable reserve development in the private passenger automobile line of insurance business. The decrease in the provision for insured events of prior years in 2023 of approximately $35.9 million primarily resulted from lower than estimated losses and loss adjustment expenses in the private passenger automobile and homeowners lines of insurance business, partially offset by unfavorable reserve development in the commercial property line of insurance business.

The Company recorded catastrophe losses net of reinsurance of approximately $508 million, $277 million, and $239 million in 2025, 2024, and 2023, respectively. Catastrophe losses incurred in 2025 was reduced by approximately $586 million of subrogation recorded on the Palisades and Eaton wildfires. See Note 12. Loss and Loss Adjustment Expense Reserves, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" for additional information. The majority of 2025 catastrophe losses resulted from the Palisades and Eaton wildfires in California and severe storms in Texas, Oklahoma and California. The majority of 2024 catastrophe losses resulted from tornadoes, hailstorms and convective storms in Texas and Oklahoma, winter storms, rainstorms and wildfires in California, and the impact of Hurricane Helene in Florida and Georgia. The majority of 2023 catastrophe losses resulted from rainstorms and hail in Texas and Oklahoma, winter storms and rainstorms in California, and the impact of Tropical Storm Hilary in California. The Company experienced favorable development of approximately $23 million, unfavorable development of approximately $9 million, and favorable development of approximately $8 million on prior years' catastrophe losses in 2025, 2024, and 2023, respectively.

Statutory Accounting Principles
The Company’s results are reported in accordance with GAAP, which differ in some respects from amounts reported under SAP prescribed by insurance regulatory authorities. Some of the significant differences under GAAP are described below:
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•Policy acquisition costs such as commissions, premium taxes, and other costs that vary with and are primarily related to the successful acquisition of new and renewal insurance contracts, are capitalized and amortized on a pro rata basis over the period in which the related premiums are earned, whereas under SAP, these costs are expensed as incurred.
•Certain assets are included in the consolidated balance sheets, whereas under SAP, such assets are designated as "nonadmitted assets," and charged directly against statutory surplus. These assets consist primarily of premium receivables that are outstanding for more than 90 days, deferred tax assets that do not meet statutory requirements for recognition, furniture, equipment, leasehold improvements, capitalized software, and prepaid expenses.
•Amounts related to ceded reinsurance are shown gross as prepaid reinsurance premiums and reinsurance recoverables, whereas under SAP, these amounts are netted against unearned premium reserves and loss and loss adjustment expense reserves.
•Fixed-maturity securities are reported at fair value, whereas under SAP, these securities are reported at amortized cost, or the lower of amortized cost, or fair value, depending on the specific type of security.
•Equity securities are marked to market through the consolidated statements of operations, whereas under SAP, these securities are marked to market through unrealized gains and losses in surplus.
•Goodwill is reported as the excess of cost of an acquired entity over the fair value of the underlying net assets and assessed periodically for impairment. Intangible assets are amortized over their useful lives. Under SAP, goodwill is reported as the excess of cost of an acquired entity over the statutory book value and amortized over 10 years. Its carrying value is limited to 10% of adjusted surplus. Under SAP, intangible assets are not recognized.
•The differing treatment of income and expense items results in a corresponding difference in federal income tax expense. Changes in deferred income taxes are reflected as an item of income tax benefit or expense, whereas under SAP, changes in deferred income taxes are recorded directly to statutory surplus as regards policyholders. Admittance testing under SAP may result in a charge to unassigned surplus for non-admitted portions of deferred tax assets. Under GAAP, a valuation allowance may be recorded against the deferred tax assets and reflected as an expense.
•Certain assessments paid to regulatory agencies that are recoverable from policyholders in future periods are expensed, whereas under SAP, these assessments are recorded as receivables.

Operating Ratios (SAP basis)

Loss and Expense Ratios
Loss and expense ratios are used to evaluate the underwriting experience of property and casualty insurance companies. Under SAP, losses and loss adjustment expenses are stated as a percentage of premiums earned because losses occur over the life of a policy, while underwriting expenses are stated as a percentage of premiums written rather than premiums earned because most underwriting expenses are incurred when policies are written and are not spread over the policy period. The statutory underwriting profit margin is the extent to which the combined loss and expense ratios are less than 100%. 

The following table presents, on a statutory basis, the Insurance Companies’ loss, expense and combined ratios, and the private passenger automobile industry combined ratio. The Insurance Companies’ ratios (Company-wide) include lines of insurance business other than private passenger automobile that accounted for approximately 40.0% of direct premiums written in 2025; hence, the Company believes its combined ratio (for private passenger automobile only) is more comparable to the industry ratios.
 Year Ended December 31,
 20252024 202320222021
Loss ratio (Company-wide)72.0 %72.6 %82.3 %85.1 %73.8 %
Expense ratio (Company-wide)24.5 %23.5 %23.5 %24.4 %24.9 %
Combined ratio (Company-wide)96.5 %96.1 %

105.8 %109.5 %98.7 %
Combined ratio (Company's private passenger automobile only)89.5 %93.1 %103.0 %110.3 %96.0 %
Industry combined ratio (all writers)(1)
   N/A94.8 %104.6 %111.7 %100.7 %
Industry combined ratio (excluding direct writers)(1)
                 N/A93.9 %  102.2 %  104.6 %99.4 %
____________
(1)Source: A.M. Best, Aggregates & Averages (2021 through 2024), for all property and casualty insurance companies (private passenger automobile line only, after policyholder dividends).
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Premiums to Surplus Ratio
The following table presents the Insurance Companies’ statutory ratios of net premiums written to policyholders’ surplus. Guidelines established by the National Association of Insurance Commissioners (the "NAIC") suggest that this ratio should be no greater than 3 to 1.
 Year Ended December 31,
 20252024202320222021
 (Amounts in thousands, except ratios)
Net premiums written$5,721,778 $5,378,310 $4,464,199 $3,978,017 $3,855,369 
Policyholders’ surplus$2,392,286 $2,030,460 $1,667,187 $1,502,424 $1,827,210 
Ratio2.4 to 12.7 to 12.7 to 12.7 to 12.1 to 1

Investments
The Company’s investments are directed by the Chief Investment Officer under the supervision of the Investment Committee of the Board of Directors. The Company’s investment strategy emphasizes safety of principal and consistent income generation, within a total return framework. The investment strategy has historically focused on maximizing after-tax yield with a primary emphasis on maintaining a well diversified, investment grade, fixed income portfolio to support the underlying liabilities and achieve a return on capital and profitable growth. The Company believes that investment yield is maximized by selecting assets that perform favorably on a long-term basis and by disposing of certain assets to enhance after-tax yield and minimize the potential effect of downgrades and defaults. The Company believes that this strategy maintains the optimal investment performance necessary to sustain investment income over time. The Company’s portfolio management approach utilizes a market risk and asset allocation strategy as the primary basis for the allocation of interest sensitive, liquid and credit assets as well as for monitoring credit exposure and diversification requirements. Within the ranges set by the asset allocation strategy, tactical investment decisions are made in consideration of prevailing market conditions.

Tax considerations are important in portfolio management. The Company closely monitors the timing and recognition of capital gains and losses to maximize the realization of any deferred tax assets arising from capital losses. The Company had no capital loss carryforward at December 31, 2025.

Investment Portfolio
The following table presents the composition of the Company’s total investment portfolio:
 December 31,
 202520242023
 
Cost(1)
Fair Value
Cost(1)
Fair Value
Cost(1)
Fair Value
   (Amounts in thousands)  
Taxable bonds$2,582,848 $2,560,651 $2,759,532 $2,704,046 $2,102,740 $2,031,594 
Tax-exempt state and municipal bonds
2,866,878 2,869,600 2,222,926 2,209,332 2,292,243 2,287,742 
Total fixed maturities5,449,726 5,430,251 4,982,458 4,913,378 4,394,983 4,319,336 
Equity securities
728,460 812,787 795,068 879,175 654,939 730,693 
Short-term investments336,978 336,992 283,792 283,817 179,375 178,491 
Total investments$6,515,164 $6,580,030 $6,061,318 $6,076,370 $5,229,297 $5,228,520 
__________ 
(1)Fixed maturities and short-term bonds at amortized cost; equities and other short-term investments at cost.

The Company applies the fair value option to all fixed maturity and equity securities and short-term investments at the time the eligible item is first recognized. For more detailed discussion on the Company's investment portfolio, including credit ratings, see "Liquidity and Capital Resources—C. Invested Assets" in "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" and Note 3. Investments, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data."


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Investment Results
The following table presents the investment results of the Company for the most recent five years:
 Year Ended December 31,
 20252024202320222021
  (Dollars in thousands) 
Average invested assets at cost(1) (2)
$5,968,575 $5,683,973 $5,096,428 $4,902,755 $4,681,462 
Net investment income(3)(4)
Before income taxes$328,701 $279,989 $234,630 $168,356 $129,727 
After income taxes$276,214 $235,419 $200,209 $146,204 $115,216 
Average annual yield on investments(3)(4)
Before income taxes4.7 %4.5 %4.3 %3.4 %2.8 %
After income taxes4.0 %3.8 %3.7 %3.0 %2.5 %
Net realized investment gains (losses) after income taxes$103,781 $70,050 $79,801 $(385,583)$88,210 
 __________
(1)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.
(2)At December 31, 2025, fixed maturity securities with call features totaled $4.4 billion at fair value and amortized cost.
(3)Net investment income includes approximately $50.7 million, $25.5 million, and $14.5 million of interest income earned on cash (approximately $40.1 million, $20.2 million, and $11.5 million after tax) for the years ended December 31, 2025, 2024, and 2023, respectively. Average annual yield on investments does not include interest income earned on cash. No interest income was earned on cash in 2021.
(4)Net investment income before and after income taxes for 2025 increased compared to 2024, primarily due to higher average invested assets and cash combined with higher average yield. Average annual yield on investments before and after income taxes for 2025 increased compared to 2024, primarily due to the maturity and replacement of lower yielding investments purchased when market interest rates were lower with higher yielding investments, combined with the higher average yield on investments purchased in 2025 using cash generated from operations compared to the average yield on overall investments in 2024.

Competitive Conditions
The Company operates in the highly competitive property and casualty insurance industry subject to competition on pricing, claims handling, consumer recognition, coverage offered and product features, customer service, and geographic coverage. Some of the Company’s competitors are larger and well-capitalized national companies that sell directly to consumers or have broad distribution networks of employed or captive agents.

Reputation for customer service and price are the principal means by which the Company competes with other insurers. In addition, the marketing efforts of independent agents can provide a competitive advantage. Based on the most recent regularly published statistical compilations of premiums written in 2024, the Company was the eighth largest writer of private passenger automobile insurance in California and the fifteenth largest in the United States.

The property and casualty insurance industry is highly cyclical, with alternating hard and soft market conditions. The Company has historically seen premium growth during hard market conditions. The Company believes that the automobile insurance market in most states went through a transitional period from hard to softening market conditions during 2025 as many insurance carriers experienced improved profitability and increased competition, with inflation easing and rates stabilizing.

Reinsurance
For California homeowners policies, the Company has reduced its catastrophe exposure from earthquakes by placing earthquake risks directly with the California Earthquake Authority ("CEA"). However, the Company continues to have catastrophe exposure to fires following an earthquake. For more detailed discussion, see "Regulation—Insurance Assessments" below.

The Company is the assuming reinsurer under a Catastrophe Portfolio Participation Reinsurance Contract ("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
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actual loss ratio exceeds the threshold loss ratio of 73.5%. The total assumed premium under the Contract is approximately $15 million for each of the 12 month periods ending December 31, 2023 through 2028. The total possible amount of losses for the Company under the Contract is approximately $30.0 million for each of the 12 month periods ending December 31, 2023 through 2028. The Company recognized approximately $1 million, $2 million, and $10 million in incurred losses under the Contract for the 12 months ended December 31, 2025, 2024, and 2023, respectively.

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 for 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 approximately $8 million in incurred losses for the 12 months ended December 31, 2025. The Quota Share Contract commenced on January 1, 2025.

The Company is the assuming reinsurer under a Catastrophe Quota Share Reinsurance Agreement ("Quota Share Agreement") effective through December 31, 2026. The Company 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 Quota Share Agreement commenced on January 1, 2026.

The Company is the ceding party to a Catastrophe Reinsurance Treaty ("Treaty") covering a wide range of perils that is effective through June 30, 2026. For the 12 months ending June 30, 2026 and 2025, the Treaty provides $2,140 million and $1,290 million of coverage, respectively, on a per occurrence basis after covered catastrophe losses exceed the Company retention limit of $200 million and $150 million, respectively. The Treaty ending June 30, 2026 and 2025 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 with certain exceptions as shown below. The Treaty ending June 30, 2026 and 2025 each includes additional restrictions as noted below.

Coverage on individual catastrophes provided for the 12 months ending June 30, 2026 under the Treaty is presented below in various layers:

 Catastrophe Losses and LAE
In Excess ofUp toPercentage of Coverage
 (Amounts in millions)
Retained$— $200 — %
Layer of Coverage (1)
200 300 90.0 
Layer of Coverage (2)
300 1,000 100.0 
Layer of Coverage (3) (4) (5)
1,000 1,600 100.0 
Layer of Coverage (6)
1,600 1,750 100.0 
Layer of Coverage (2)
1,750 2,350 100.0 
__________ 
(1) 10% of this layer is not subject to reinstatement. The percent of coverage of 90% noted for this layer is for the first catastrophe event. In the event of the second catastrophe, the percent of coverage for this layer is 80%.
(2) Layer of Coverage represents multiple actual treaty layers that are grouped for presentation purposes.
(3) Approximately 16.5% of this layer excludes losses from fires following an earthquake.
(4) Approximately 1.1% of this layer excludes losses from fires following an earthquake and from tropical cyclones.
(5) Approximately 9.3% of this layer has a maximum contribution limit to ultimate net loss from all losses in Texas of $425 million.
(6) The coverage of this layer is provided by a catastrophe bond that is in effect from July 15, 2025 through July 14, 2028. This layer covers only California wildfires and fires following an earthquake in California, and is not subject to reinstatement.



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Coverage on individual catastrophes provided for the 12 months ended June 30, 2025 under the Treaty is presented below in various layers:
 Catastrophe Losses and LAE
In Excess ofUp toPercentage of Coverage
 (Amounts in millions)
Retained$— $150 — %
Layer of Coverage (1)
150 650 100.0 
Layer of Coverage (1) (2) (3) (4)
650 1,300 100.0 
Layer of Coverage1,300 1,440 100.0 
__________ 
(1) Layer of Coverage represents multiple actual treaty layers that are grouped for presentation purposes.
(2) Approximately 10% of this layer covers California, Arizona, Nevada and Texas only, and has a maximum contribution limit to ultimate net loss from all losses in Texas of $425 million.
(3) Approximately 14% of this layer excludes losses from named storms.
(4) Approximately 8% of this layer covers only California wildfires and fires following an earthquake in California, and is not subject to reinstatement.

The table below presents the combined total reinsurance premiums under the Treaty (annual premiums and reinstatement premiums) for the 12 months ending June 30, 2026 and 2025, respectively:

Treaty
Annual Premium (1)
 Reinstatement Premium (2)
Total Combined Premium (2)
 (Amounts in millions)
For the 12 months ending June 30, 2026
$237 $— $237 
For the 12 months ended June 30, 2025
$105 $101 $206 
__________ 
(1)    The increase in the annual premium is primarily due to higher reinsurance coverage and rates, growth in the covered book of business, and an evolving view of risk by the reinsurers.
(2)    The reinstatement premium and the total combined premium for the treaty period ending June 30, 2026 are projected amounts to be paid based on the latest information available. The reinstatement premium and the total combined premium for the treaty period ended June 30, 2025 are based on actual amounts paid.

The Treaty ending June 30, 2026 and 2025 each provides for one full reinstatement of coverage limits except for certain layers of coverage noted in the tables above. Reinstatement premiums are based on the amount of reinsurance benefits used by the Company at 100% of the annual premium rate, with the exception of the reinstatement restrictions noted in the tables above, up to the maximum reinstatement premium of approximately $221 million and $101 million if the full amount of benefit is used for the 12 months ending June 30, 2026 and 2025, respectively.

The total amount of reinstatement premiums is recorded as ceded reinstatement premiums written at the time of the catastrophe event based on the total amount of reinsurance benefits expected to be used for the event, and such reinstatement premiums are recognized ratably over the remaining term of the Treaty as ceded reinstatement premiums earned.

The catastrophe events that occurred in 2025 caused approximately $1,830 million in losses and loss adjustment expenses net of subrogation to the Company before reinsurance, resulting primarily from the Palisades and Eaton wildfires in California and severe storms in Texas, Oklahoma and California. Catastrophe losses incurred for the year ended December 31, 2025 was reduced by approximately $586 million of subrogation recorded on the Palisades and Eaton wildfires. All of the reinsurance benefits available for the 12 months ending 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 12. Loss and Loss Adjustment Expense Reserves, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" 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 ending June 30, 2026 and 2025, respectively.

The catastrophe events that occurred in 2024 caused approximately $244 million in losses to the Company before reinsurance as of December 31, 2025, resulting primarily from tornadoes, hailstorms and convective storms in Texas and
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Oklahoma, winter storms, rainstorms and wildfires in California, and the impact of Hurricane Helene in Florida and Georgia. No reinsurance benefits were available under the Treaty for these losses as none of the 2024 catastrophe events individually resulted in losses in excess of the Company’s per-occurrence retention limit of $150 million and $100 million under the Treaty for the 12 months ending June 30, 2025 and 2024, respectively.

The Company carries a commercial umbrella reinsurance treaty and a per-risk property reinsurance treaty, and seeks facultative arrangements for large property risks. In addition, the Company has other reinsurance in force that is not material to the consolidated financial statements. If any reinsurers are unable to perform their obligations under a reinsurance treaty, the Company will be required, as primary insurer, to discharge all obligations to its policyholders in their entirety.

Regulation
The Insurance Companies are subject to significant regulation and supervision by insurance departments of the jurisdictions in which they are domiciled or licensed to operate business.

Department of Insurance Oversight
The powers of the DOI in each state primarily include the prior approval of insurance rates and rating factors and the establishment of capital and surplus requirements, solvency standards, restrictions on dividend payments and transactions with affiliates. DOI regulations and supervision are designed principally to benefit policyholders rather than shareholders.

California Proposition 103 (the "Proposition") requires that property and casualty insurance rates be approved by the California DOI prior to their use and that no rate be approved which is excessive, inadequate, unfairly discriminatory, or otherwise in violation of the provisions of the Proposition. The Proposition specifies four statutory factors required to be applied in "decreasing order of importance" in determining rates for private passenger automobile insurance: (1) the insured’s driving safety record, (2) the number of miles the insured drives annually, (3) the number of years of driving experience of the insured and (4) whatever optional factors are determined by the California DOI to have a substantial relationship to risk of loss and are adopted by regulation. The statute further provides that insurers are required to give at least a 20% discount to "good drivers," as defined, from rates that would otherwise be charged to such drivers and that no insurer may refuse to insure a "good driver." The Company’s rate plan operates under these rating factor regulations.

Insurance rates in California, Georgia, New York, New Jersey, and Nevada require prior approval from the state DOI, while insurance rates in Illinois, Texas, Virginia, Oklahoma, and Arizona must only be filed with the respective DOI before they are implemented. Florida has a modified version of use and file laws. Insurance laws and regulations in all states in which the Company operates provide that rates must not be excessive, inadequate, or unfairly discriminatory.

The DOI in each state in which the Company operates is responsible for conducting periodic financial and market conduct examinations of the Insurance Companies in their states. Market conduct examinations typically review compliance with insurance statutes and regulations with respect to rating, underwriting, claims handling, billing, and other practices. For more detailed information on the Company’s current financial and market conduct examinations, see "Liquidity and Capital Resources—F. Regulatory Capital Requirements" in "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations."

For a discussion of current regulatory matters in California, see "Regulatory and Legal Matters" in "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" and Note 18. Commitments and Contingencies, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data."

The operations of the Company are dependent on the laws of the states in which it does business and changes in those laws can materially affect the revenue and expenses of the Company. The Company retains its own legislative advocates in California. The Company made direct financial contributions of approximately $38,000 and $0 to officeholders and candidates in 2025 and 2024, respectively. The Company believes in supporting the political process and intends to continue to make such contributions in amounts which it determines to be appropriate.

The Insurance Companies must comply with minimum capital requirements under applicable state laws and regulations. The risk-based capital ("RBC") formula is used by insurance regulators to monitor capital and surplus levels. It was designed to capture the widely varying elements of risks undertaken by writers of different lines of insurance business having differing risk characteristics, as well as writers of similar lines where differences in risk may be related to corporate structure, investment policies, reinsurance arrangements, and a number of other factors. The Company periodically monitors the RBC level of each of the Insurance Companies. As of December 31, 2025, 2024 and 2023, each of the Insurance Companies exceeded the minimum required RBC level. For more detailed information, see "Liquidity and Capital Resources—F. Regulatory Capital
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Requirements" in "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations."

Own Risk and Solvency Assessment
Insurance companies are required to file an Own Risk and Solvency Assessment ("ORSA") with the insurance regulators in their domiciliary states. The ORSA is required to cover, among many items, a company’s risk management policies, the material risks to which the company is exposed, how the company measures, monitors, manages and mitigates material risks, and how much economic and regulatory capital is needed to continue to operate in a strong and healthy manner. The ORSA is intended to be used by state insurance regulators to evaluate the risk exposure and quality of the risk management processes within insurance companies to assist in conducting risk-focused financial examinations and for determining the overall financial condition of insurance companies. The Company filed its most recent ORSA Summary Report with the California DOI in November 2025. Compliance with the ORSA requirements did not have a material impact on the Company's consolidated financial statements.

Insurance Assessments
The California Insurance Guarantee Association ("CIGA") was created to pay claims on behalf of insolvent property and casualty insurers. Each year, these claims are estimated by CIGA and the Company is assessed for its pro-rata share based on prior year California premiums written in the particular line. These assessments are currently limited to 2% of premiums written in the preceding year and are recouped through a mandated surcharge to policyholders in the year after the assessment. There were no CIGA assessments in 2025.

The CEA is a quasi-governmental organization that was established to provide a market for earthquake coverage to California homeowners. The Company places all new and renewal earthquake coverage offered with its homeowner policy directly with the CEA. The Company receives a small fee for placing business with the CEA, which is recorded as other revenue in the consolidated statements of operations. Upon the occurrence of a major seismic event, the CEA has the ability to assess participating companies for losses. These assessments are made after CEA capital has been expended and are based upon each company’s participation percentage multiplied by the amount of the total assessment. Based upon the most recent information provided by the CEA, the Company’s maximum total exposure to CEA assessments at April 30, 2025, the most recent date at which information was available, was $89.3 million. There were no assessments made in 2025.

The Insurance Companies in other states are also subject to the provisions of similar insurance guaranty associations. There were no material assessments during 2025 in other states that cannot be recouped through a premium tax credit or a surcharge to policyholders.

In addition, the Company is a member of the California FAIR Plan, the state's fire insurer of last resort. The FAIR Plan assessed the Company $50 million to strengthen the FAIR Plan's capital position following the Palisades and Eaton wildfires in the first quarter of 2025. See Note 12. Loss and Loss Adjustment Expense Reserves, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" for additional information.

Holding Company Act
The California Companies are subject to California DOI regulation pursuant to the provisions of the California Insurance Holding Company System Regulatory Act (the "Holding Company Act"). The California DOI may examine the affairs of each of the California Companies at any time. The Holding Company Act requires disclosure of any material transactions among affiliates within a holding company system. Some transactions require advance notice and may not be made if the California DOI disapproves the transaction within 30 days after notice. Such transactions include, but are not limited to, extraordinary dividends; management agreements, service contracts, and cost-sharing arrangements, and modifications thereto; all guarantees that are not quantifiable, or, if quantifiable, exceed the lesser of one-half of 1% of admitted assets or 10% of policyholders’ surplus as of the preceding December 31; derivative transactions or series of derivative transactions; reinsurance agreements or modifications thereto in which the reinsurance premium or a change in the insurer’s liabilities equals or exceeds 5% of the policyholders’ surplus as of the preceding December 31; sales, purchases, exchanges, loans, and extensions of credit; and investments, in the net aggregate, involving more than the lesser of 3% of the respective California Companies’ admitted assets or 25% of statutory surplus as regards policyholders as of the preceding December 31. An extraordinary dividend is a dividend which, together with other dividends or distributions made within the preceding 12 months, exceeds the greater of 10% of the insurance company’s statutory policyholders’ surplus as of the preceding December 31 or the insurance company’s statutory net income for the preceding calendar year. The Holding Company Act also requires filing of an annual enterprise risk report identifying the material risks within the insurance holding company system.

California-domiciled insurance companies are also required to notify the California DOI of any dividend after
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declaration, but prior to payment. There are similar limitations imposed by other states on the Insurance Companies’ ability to pay dividends. As of December 31, 2025, the Insurance Companies are permitted to pay in 2026, without obtaining DOI approval for extraordinary dividends, $448 million in dividends to Mercury General, of which $422 million may be paid by the California Companies.

The Holding Company Act also provides that the acquisition or change of "control" of a California domiciled insurance company or of any person who controls such an insurance company cannot be consummated without the prior approval of the California DOI. In general, a presumption of "control" arises from the ownership of voting securities and securities that are convertible into voting securities, which in the aggregate constitute 10% or more of the voting securities of a California insurance company or of a person that controls a California insurance company, such as Mercury General. A person seeking to acquire "control," directly or indirectly, of the Company must generally file with the California DOI an application for change of control containing certain information required by statute and published regulations and provide a copy of the application to the Company. The Holding Company Act also effectively restricts the Company from consummating certain reorganizations or mergers without prior regulatory approval.

Each of the Insurance Companies is subject to holding company regulations in the state in which it is domiciled. These provisions are substantially similar to those of the Holding Company Act.

Information about the Company's Executive Officers
The following table presents certain information concerning the executive officers of the Company as of February 12, 2026:
NameAgePosition
George Joseph104Chairman of the Board
Gabriel Tirador61Chief Executive Officer
Victor G. Joseph39President and Chief Operating Officer
Theodore R. Stalick62Senior Vice President and Chief Financial Officer
Kelly Butler43Vice President and Chief Underwriting Officer
Jenny D. Chan52Vice President and Chief Human Resources Officer
Nick Colby41Vice President and Chief Sales Officer
Katie Gibbs 36Vice President and Chief Experience Officer
Christopher Graves60Vice President and Chief Investment Officer
Wei Pang49Vice President and Chief Technology Officer
Randall R. Petro62Vice President and Chief Claims Officer
Mark Ribisi 63President and Chief Executive Officer of AIS Management LLC
Jeffrey M. Schroeder49Vice President and Chief Product Officer
Erik Thompson57Vice President and Chief Marketing Officer
Charles Toney64Vice President and Chief Actuary
Judy A. Walters79Vice President, Corporate Affairs and Secretary
Simon Zhang49Vice President and Chief Data & Analytics Officer

Mr. George Joseph, Chairman of the Board of Directors, has served in this capacity since 1961. He held the position of Chief Executive Officer of the Company for 45 years from 1961 through 2006. Mr. Joseph has more than 60 years’ experience in the property and casualty insurance business.

Mr. Tirador, Chief Executive Officer, served as the Company’s assistant controller from 1994 to 1996. In 1997 and 1998, he served as the Vice President and Controller of the Automobile Club of Southern California. He rejoined the Company in 1998 as Vice President and Chief Financial Officer. He was appointed President and Chief Operating Officer in October 2001 and Chief Executive Officer in 2007. Mr. Tirador has over 30 years' experience in the property and casualty insurance industry and is an inactive Certified Public Accountant.

Mr. Victor Joseph, President and Chief Operating Officer, has been employed by the Company in various capacities since 2009, and was appointed Vice President and Chief Underwriting Officer in July 2017, Executive Vice President and Chief
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Operating Officer in January 2022, and President and Chief Operating Officer in January 2024. Mr. Victor Joseph is Mr. George Joseph’s son.

Mr. Stalick, Senior Vice President and Chief Financial Officer, joined the Company as Corporate Controller in 1997. He was appointed Chief Accounting Officer in October 2000 and Vice President and Chief Financial Officer in 2001. In July 2013, he was named Senior Vice President and Chief Financial Officer. Mr. Stalick is a Certified Public Accountant.

Ms. Butler, Vice President and Chief Underwriting Officer, joined the Company as a Casualty Claims Adjuster in 2004 and worked in various capacities including as Director of Personal Property Underwriting. Ms. Butler was appointed Vice President and Chief Underwriting Officer in January 2022.

Ms. Chan, Vice President and Chief Human Resources Officer, joined the Company in 2026. Prior to joining the Company, she served as the Chief People Officer at Arctera from 2024 to 2025. Prior to 2024, she held multiple senior leadership roles at Accenture, including Chief Human Resources Officer for a division and Global Head of Health and Well-Being.

Mr. Colby, Vice President and Chief Sales Officer, joined the Company in 2025. Prior to joining the Company, he served as Commercial Lines Director of Distribution and Sales/Marketing Process Leader for Progressive Insurance from 2018 to 2025. Mr. Colby has over 15 years of experience in sales and marketing.

Ms. Gibbs, Vice President and Chief Experience Officer, joined the Company in 2022. Prior to joining the Company, she served as Vice President, Product Development for Kemper Insurance from 2019 to 2022. Prior to 2019, she held various leadership positions in Product and Corporate Strategy at American Family Insurance and its subsidiaries.

Mr. Graves, Vice President and Chief Investment Officer, has been employed by the Company in the investment department since 1986. Mr. Graves was appointed Chief Investment Officer in 1998, and named Vice President in 2001.

Mr. Pang, Vice President and Chief Technology Officer, joined the Company in 2023. Prior to joining the Company, he served as Chief Technology Officer for Appen from 2018 to 2023 and Chief Data Officer for Ctrip from 2017 to 2018. Prior to 2017, he held various leadership positions at eBay and IBM.

Mr. Petro, Vice President and Chief Claims Officer, has been employed by the Company in the Claims Department since 1987. Mr. Petro was appointed Vice President in March 2014, and named Chief Claims Officer in March 2015.

Mr. Ribisi, President and Chief Executive Officer of AIS Management LLC, joined the Company in 2009 as President and Chief Executive Officer of AIS Management LLC, a significant subsidiary of the Company. Prior to joining the Company, he served as Vice President and Chief Operating Officer for Aon’s Personal Lines Division from 2002 to 2009. Mr. Ribisi has over 35 years' experience in the property and casualty insurance industry and is a Certified Insurance Counselor.

Mr. Schroeder, Vice President and Chief Product Officer, has been employed by the Company since 2010. Prior to his appointment as Vice President and Chief Product Officer, he served as President and Chief Operating Officer of OIC. Prior to joining the Company, Mr. Schroeder was a Product Manager at 21st Insurance Company. 

Mr. Thompson, Vice President, Chief Marketing Officer, joined the Company as Director of Advertising in 2005, and was appointed Vice President, Advertising and Public Relations in October 2017. Prior to joining the Company, Mr. Thompson held various leadership positions in advertising, marketing, and public relations at several organizations, including Universal Studios, Inc., Turner, and Columbia TriStar Television. 

Mr. Toney, Vice President and Chief Actuary, joined the Company in 1984 as a programmer/analyst. In 1994, he earned his Fellowship in the Casualty Actuarial Society and was appointed to his current position. In 2011, he became a board member of the Personal Insurance Federation of California. Mr. Toney is Mr. George Joseph’s nephew.

Ms. Walters, Vice President, Corporate Affairs and Secretary, has been employed by the Company since 1967, and has served as its Secretary since 1982. Ms. Walters was named Vice President, Corporate Affairs in 1998.

Mr. Zhang, Vice President and Chief Data & Analytics Officer, joined the Company in 2023. Prior to joining the Company, he co-founded a data analytics company, GrowingIO and worked there for 8 years. He served as Senior Director of Business Analytics for LinkedIn from 2010 to 2015. Mr. Zhang has over 20 years of experience in the data analytics and data science fields.
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Item 1A.Risk Factors
The Company’s business involves various risks and uncertainties in addition to the normal risks of business, some of which are discussed in this section. It should be noted that the Company’s business and that of other insurers may be adversely affected by a downturn in general economic conditions and other forces beyond the Company’s control. In addition, other risks and uncertainties not presently known or that the Company currently believes to be immaterial may also adversely affect the Company’s business. Any such risks or uncertainties, or any of the following risks or uncertainties, that develop into actual events could result in a material and adverse effect on the Company’s business, financial condition, results of operations, or liquidity.

The information discussed below should be considered carefully with the other information contained in this Annual Report on Form 10-K and the other documents and materials filed by the Company with the SEC, as well as news releases and other information publicly disseminated by the Company from time to time.

Risks Related to the Company’s Business

The Company remains highly dependent upon California to produce revenues and operating profits.
For the year ended December 31, 2025, the Company generated approximately 85% of its direct automobile insurance premiums written in California. The Company’s financial results are subject to prevailing regulatory, legal, economic, demographic, competitive, and other conditions in the states in which the Company operates and changes in any of these conditions could negatively impact the Company’s results of operations.

Mercury General is a holding company that relies on regulated subsidiaries for cash flows to satisfy its obligations.
As a holding company, Mercury General maintains no operations that generate cash flows sufficient to pay operating expenses, shareholders’ dividends, or principal or interest on its indebtedness. Consequently, Mercury General relies on the ability of the Insurance Companies, particularly the California Companies, to pay dividends for Mercury General to meet its obligations. The ability of the Insurance Companies to pay dividends is regulated by state insurance laws, which limit the amount of, and in certain circumstances may prohibit the payment of, cash dividends. Generally, these insurance regulations permit the payment of dividends only out of earned surplus in any year which, together with other dividends or distributions made within the preceding 12 months, do not exceed the greater of 10% of statutory surplus as of the end of the preceding year or the net income for the preceding year, with larger dividends payable only after receipt of prior regulatory approval. The inability of the Insurance Companies to pay dividends in an amount sufficient to enable the Company to meet its cash requirements at the holding company level could have a material adverse effect on the Company’s results of operations, financial condition, and its ability to pay dividends to its shareholders.

The Insurance Companies are subject to minimum capital and surplus requirements, and any failure to meet these requirements could subject the Insurance Companies to regulatory action.
The Insurance Companies are subject to risk-based capital standards and other minimum capital and surplus requirements imposed under the applicable laws of their states of domicile. The risk-based capital standards, based upon the Risk-Based Capital Model Act adopted by the NAIC, require the Insurance Companies to report their results of RBC calculations to state departments of insurance and the NAIC. If any of the Insurance Companies fails to meet these standards and requirements, the DOI regulating such subsidiary may require specified actions by the subsidiary.

The Company’s success depends on its ability to accurately underwrite risks and to charge adequate premiums to policyholders.
The Company’s financial condition, results of operations, and liquidity depend on its ability to underwrite and set premiums accurately for the risks it assumes. Premium rate adequacy is necessary to generate sufficient premium to offset losses, loss adjustment expenses, and underwriting expenses and to earn a profit. In order to price its products accurately, the Company must collect and properly analyze a substantial volume of data; develop, test, and apply appropriate rating formulae; closely monitor and timely recognize changes in trends; and project both severity and frequency of losses with reasonable accuracy. The Company’s ability to undertake these efforts successfully, and as a result, price accurately, is subject to a number of risks and uncertainties, including but not limited to:
•availability of sufficient reliable data;
•incorrect or incomplete analysis of available data;
•uncertainties inherent in estimates and assumptions, generally;
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•selection and application of appropriate rating formulae or other pricing methodologies;
•successful innovation of new pricing strategies;
•recognition of changes in trends and in the projected severity and frequency of losses;
•the Company’s ability to forecast renewals of existing policies accurately;
•unanticipated court decisions, legislation or regulatory action;
•ongoing changes in the Company’s claim settlement practices;
•changes in operating expenses;
•changing driving patterns;
•extra-contractual liability arising from bad faith claims;
•catastrophes, including those which may be related to climate change;
•unexpected medical inflation; and
•unanticipated inflation in automobile repair costs, automobile parts prices, and used car prices.

Such risks and uncertainties may result in the Company’s pricing being based on outdated, inadequate or inaccurate data, or inappropriate analyses, assumptions or methodologies, and may cause the Company to estimate incorrectly future changes in the frequency or severity of claims. As a result, the Company could underprice risks, which would negatively affect the Company’s margins, or it could overprice risks, which could reduce the Company’s volume and competitiveness. In either event, the Company’s financial condition, results of operations, and liquidity could be materially and adversely affected.

The Company’s insurance rates are subject to approval by the departments of insurance in most of the states in which the Company operates, and to political influences.

In five of the states in which it operates, including California, the Company must obtain the DOI’s prior approval of insurance rates charged to its customers, including any increases in those rates. If the Company is unable to receive approval of the rate changes it requests, or if such approval is delayed, the Company’s ability to operate its business in a profitable manner may be limited and its financial condition, results of operations, and liquidity may be adversely affected. Additionally, in California, the law allows for consumer groups to intervene in rate filings, which frequently causes delays in rate approvals and implementation of rate changes and can impact the rate that is ultimately approved.

From time to time, the automobile insurance industry comes under pressure from state regulators, legislators, and special interest groups to reduce, freeze, or set rates at levels that do not correspond with underlying costs, in the opinion of the Company’s management. The homeowners insurance business faces similar pressure, particularly as regulators in catastrophe-prone states seek an acceptable methodology to price for catastrophe exposure. In addition, various insurance underwriting and pricing criteria regularly come under attack by regulators, legislators, and special interest groups. The result could be legislation, regulations, or new interpretations of existing regulations that adversely affect the Company’s business, financial condition, and results of operations.

The effects of emerging claim and coverage issues on the Company’s business are uncertain and may have an adverse effect on the Company’s business.
As industry practices and legal, judicial, social, and other environmental conditions change, unexpected and unintended issues related to claims and coverage may emerge. These issues may adversely affect the Company’s business by either extending coverage beyond its underwriting intent or by increasing the number or size of claims. In some instances, these changes may not become apparent until sometime after the Company has issued insurance policies that are affected by the changes. As a result, the full extent of liability under the Company’s insurance policies may not be known for many years after a policy is issued.

Loss of, or significant restriction on, the use of credit scoring in the pricing and underwriting of personal lines products could reduce the Company’s future profitability.
The Company uses credit scoring as a factor in pricing and underwriting decisions where allowed by state law. Some consumer groups and regulators have questioned whether the use of credit scoring unfairly discriminates against some groups of people and are seeking to prohibit or restrict the use of credit scoring in underwriting and pricing. Laws or regulations that significantly curtail or regulate the use of credit scoring, if enacted in a large number of states in which the Company operates,
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could negatively impact the Company’s future results of operations.

If the Company cannot maintain its A.M. Best ratings, it may not be able to maintain premium volume in its insurance operations sufficient to attain the Company’s financial performance goals.

The Company’s ability to retain its existing business or to attract new business in its Insurance Companies is affected by its rating by A.M. Best. A.M. Best currently rates all of the Insurance Companies as A (Excellent). On February 20, 2025, A.M. Best affirmed the Financial Strength Rating ("FSR") of A (Excellent) and revised the outlook from Stable to Negative for the Company's Insurance Companies. The Company believes that if it is unable to maintain its A.M. Best ratings within the A ratings range, it may face greater challenges to grow its premium volume sufficiently to attain its financial performance goals, which may adversely affect the Company’s business, financial condition, and results of operations.

The Company may require additional capital in the future, which may not be available or may only be available on unfavorable terms.

The Company’s future capital requirements, including to fund future growth opportunities, depend on many factors, including its ability to underwrite new business successfully, its ability to establish premium rates and reserves at levels sufficient to cover losses, the success of its expansion plans, the performance of its investment portfolio and its ability to obtain financing. The Company may seek to obtain financing through equity or debt issuances, or sales of all or a portion of its investment portfolio or other assets. The Company’s ability to obtain financing also depends on economic conditions affecting financial markets and financial strength and claims-paying ability ratings, which are assigned based upon an evaluation of the Company’s ability to meet its financial obligations. The Company’s current financial strength rating with Fitch and Moody's is A- with Stable outlook and A3 with Negative outlook, respectively. If the Company were to seek financing through the capital markets in the future, there can be no assurance that the Company would obtain favorable ratings from rating agencies. Any equity or debt financing, if available at all, may not be available on terms that are favorable to the Company. In the case of equity financing, the Company’s shareholders could experience dilution. In addition, such securities may have rights, preferences, and privileges that are senior to those of the Company’s current shareholders. If the Company cannot obtain adequate capital on favorable terms or at all, its business, financial condition, and results of operations could be adversely affected.

Changes in market interest rates, defaults on securities and tax considerations may have an adverse effect on the Company’s investment portfolio, which may adversely affect the Company’s financial results.
The Company’s financial results are affected, in part, by the performance of its investment portfolio. The Company’s investment portfolio contains interest rate sensitive-investments, such as municipal and corporate bonds. Increases in market interest rates may have an adverse impact on the value of the investment portfolio by decreasing the value of fixed income securities. Declining market interest rates could have an adverse impact on the Company’s investment income as it invests positive cash flows from operations and as it reinvests proceeds from maturing and called investments in new investments that could yield lower rates than the Company’s investments have historically generated. Defaults in the Company’s investment portfolio may produce operating losses and negatively impact the Company’s results of operations.

Interest rates are highly sensitive to many factors, including governmental monetary policies, domestic and international economic and political conditions, and other factors beyond the Company’s control. Although the Company takes measures to manage the risks of investing in a changing interest rate environment, it may not be able to mitigate interest rate sensitivity effectively. The Company’s mitigation efforts include maintaining a high quality portfolio and managing the duration of the portfolio to reduce the effect of interest rate changes. Despite its mitigation efforts, a significant change in interest rates could have a material adverse effect on the Company’s financial condition and results of operations. Although the Company monitors the timing and recognition of capital gains and losses in an effort to maximize the realization of deferred tax assets arising from capital losses, no guaranty can be provided that such monitoring or the Company's tax strategies will be effective.

The Company’s valuation of financial instruments may include methodologies, estimates, and assumptions that are subject to differing interpretations and could result in changes to valuations that may materially adversely affect the Company’s financial condition or results of operations.
The Company employs a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date using the exit price. Accordingly, when market observable data are not readily available, the Company’s own assumptions are set to reflect those that market participants would be presumed to use in pricing the asset or liability at the measurement date. Assets and liabilities recorded on the consolidated balance sheets at fair value are categorized based on the level of judgment associated with the inputs used to measure their fair
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value and the level of market price observability.

During periods of market disruption, including periods of significantly changing interest rates, rapidly widening credit spreads, inactivity or illiquidity, it may be difficult to value certain of the Company’s securities if trading becomes less frequent and/or market data become less observable. There may be certain asset classes in historically active markets with significant observable data that become illiquid due to changes in the financial environment. In such cases, the valuations associated with such securities may rely more on management's judgment and include inputs and assumptions that are less observable or require greater estimation as well as valuation methods that are more sophisticated or require greater estimation. The valuations generated by such methods may be different from the value at which the investments ultimately may be sold. Further, rapidly changing and unprecedented credit and equity market conditions could materially impact the valuation of securities as reported within the Company’s consolidated financial statements, and the period-to-period changes in value could vary significantly. Decreases in value may have a material adverse effect on the Company’s financial condition or results of operations.

Changes in the financial strength ratings of financial guaranty insurers issuing policies on bonds held in the Company’s investment portfolio may have an adverse effect on the Company’s investment results.
In an effort to enhance the bond rating applicable to certain bond issues, some bond issuers purchase municipal bond insurance policies from private insurers. The insurance generally guarantees the payment of principal and interest on a bond issue if the issuer defaults. By purchasing the insurance, the financial strength ratings applicable to the bonds are based on the credit worthiness of the insurer as well as the underlying credit of the bond issuer. These financial guaranty insurers are subject to DOI oversight. As the financial strength ratings of these insurers are reduced, the ratings of the insured bond issues correspondingly decrease. Although the Company has determined that the financial strength ratings of the underlying bond issues in its investment portfolio are within the Company’s investment policy without the enhancement provided by the insurance policies, any further downgrades in the financial strength ratings of these insurance companies or any defaults on the insurance policies written by these insurance companies may reduce the fair value of the underlying bond issues and the Company’s investment portfolio or may reduce the investment results generated by the Company’s investment portfolio, which could have a material adverse effect on the Company’s financial condition, results of operations, and liquidity.

Deterioration of the municipal bond market in general or of specific municipal bonds held by the Company may result in a material adverse effect on the Company’s financial condition, results of operations, and liquidity.
At December 31, 2025, approximately 44% of the Company’s total investment portfolio at fair value and approximately 53% of its total fixed maturity securities at fair value were invested in tax-exempt municipal bonds. With such a large percentage of the Company’s investment portfolio invested in municipal bonds, the performance of the Company’s investment portfolio, including the cash flows generated by the investment portfolio, is significantly dependent on the performance of municipal bonds. If the value of municipal bond markets in general or any of the Company’s municipal bond holdings deteriorates, the performance of the Company’s investment portfolio, financial condition, results of operations, and liquidity may be materially and adversely affected.

If the Company’s loss reserves are inadequate, its business and financial position could be harmed.
The process of establishing property and liability loss reserves is inherently uncertain due to a number of factors, including underwriting quality, the frequency and amount of covered losses, variations in claims settlement practices, the costs and uncertainty of litigation, and expanding theories of liability. While the Company believes that its actuarial techniques and databases are sufficient to estimate loss reserves, the Company’s approach may prove to be inadequate. If any of these contingencies, many of which are beyond the Company’s control, results in loss reserves that are not sufficient to cover its actual losses, the Company’s financial condition, results of operations, and liquidity may be materially and adversely affected.

There is uncertainty involved in the availability of reinsurance and the collectability of reinsurance recoverable.
The Company reinsures a portion of its potential losses on the policies it issues to mitigate the volatility of the losses on its financial condition and results of operations. The availability and cost of reinsurance is subject to market conditions, which are outside of the Company’s control. From time to time, market conditions have limited, and in some cases, prevented insurers from obtaining the types and amounts of reinsurance that they consider adequate for their business needs. As a result, the Company may not be able to successfully purchase reinsurance and transfer a portion of the Company’s risk through reinsurance arrangements. In addition, as is customary, the Company initially pays all claims and seeks to recover the reinsured losses from its reinsurers. Although the Company reports as assets the amount of claims paid which the Company expects to recover from reinsurers, no assurance can be given that the Company will be able to collect from its reinsurers. If the amounts actually recoverable under the Company’s reinsurance treaties are ultimately determined to be less than the amount it has reported as recoverable, the Company may incur a loss during the period in which that determination is made.

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There is uncertainty involved in the collectability of subrogation recoverable.
The Company actively pursues subrogation against responsible third parties after paying covered claims to its policyholders. When catastrophe events occur, the total potential amount of subrogation recoverable from third parties can be significant due to the large losses resulting from the catastrophes. When the Company is presented with the right opportunity to sell its subrogation rights, the Company may sell such rights to third party investors or financial institutions. Alternatively, the Company may choose to seek subrogation recovery through litigation and/or negotiation with the parties involved. Although the amount of subrogation recoverable from third parties is recorded as an offset against loss and loss adjustment expense reserves, no assurance can be given that the Company will be able to collect the recoverable amount from third parties through litigation and/or negotiation. In addition, the Company may not be able to find suitable buyers for its subrogation rights or sell such rights for a price equal to or higher than the amount that the Company recorded as subrogation recoverable. If the amount actually recoverable is ultimately determined to be less than the amount the Company has recorded as subrogation recoverable, the Company may incur a significant loss during the period in which that determination is made, which could have a material and adverse impact on the Company’s financial condition and results of operations. See Note 12. Loss and Loss Adjustment Expense Reserves, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" for discussion of significant amounts of subrogation recoverable resulting from the Palisades and Eaton wildfires that occurred in January 2025.

The failure of any loss limitation methods employed by the Company could have a material adverse effect on its financial condition or results of operations.
Various provisions of the Company’s policies, such as limitations or exclusions from coverage which are intended to limit the Company’s risks, may not be enforceable in the manner the Company intends. In addition, the Company’s policies contain conditions requiring the prompt reporting of claims and the Company’s right to decline coverage in the event of a violation of that condition. While the Company’s insurance product exclusions and limitations reduce the Company’s loss exposure and help eliminate known exposures to certain risks, it is possible that a court or regulatory authority could nullify or void an exclusion or legislation could be enacted modifying or barring the use of such endorsements and limitations in a way that would adversely affect the Company’s loss experience, which could have a material adverse effect on its financial condition or results of operations.

The Company’s business is vulnerable to significant catastrophic property loss, which could have an adverse effect on its financial condition and results of operations.
The Company faces a significant risk of loss in the ordinary course of its business for property damage resulting from natural disasters, man-made catastrophes and other catastrophic events, particularly hurricanes, earthquakes, hail storms, explosions, tropical storms, rain storms, fires, mudslides, sinkholes, war, acts of terrorism, severe weather and other natural and man-made disasters. Such events typically increase the frequency and severity of automobile and other property claims. Because catastrophic loss events are by their nature unpredictable, historical results of operations may not be indicative of future results of operations, and the occurrence of claims from catastrophic events may result in substantial volatility in the Company’s financial condition and results of operations from period to period. Although the Company attempts to manage its exposure to such events, the occurrence of one or more major catastrophes in any given period could have a material and adverse impact on the Company’s financial condition and results of operations and could result in substantial outflows of cash as losses are paid. See Note 12. Loss and Loss Adjustment Expense Reserves, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" for discussion of significant catastrophe losses related to the Palisades and Eaton wildfires that occurred in January 2025.

The Company depends on independent agents who may discontinue sales of its policies at any time.
The Company sells its insurance policies primarily through a network of approximately 8,510 independent agents. The Company must compete with other insurance carriers for these agents’ business. Some competitors offer a larger variety of products, lower prices for insurance coverage, higher commissions, or more attractive non-cash incentives. To maintain its relationship with these independent agents, the Company must pay competitive commissions, be able to respond to their needs quickly and adequately, and create a consistently high level of customer satisfaction. If these independent agents find it preferable to do business with the Company’s competitors, it would be difficult to renew the Company’s existing business or attract new business. State regulations may also limit the manner in which the Company’s producers are compensated or incentivized. Such developments could negatively impact the Company’s relationship with these parties and ultimately reduce revenues.

The Company’s expansion plans may adversely affect its future profitability.
The Company intends to continue to expand its operations in several of the states in which the Company has operations
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and may expand into states in which it has not yet begun operations. The intended expansion will necessitate increased expenditures. The Company intends to fund these expenditures out of cash flows from operations. The expansion may not occur, or if it does occur, may not be successful in providing increased revenues or profitability. If the Company’s cash flows from operations are insufficient to cover the costs of the expansion, or if the expansion does not provide the benefits anticipated, the Company’s financial condition, results of operations, and ability to grow its business may be harmed.

Any inability of the Company to realize its deferred tax assets, if and when they arise, may have a material adverse effect on the Company’s financial condition and results of operations.
The Company recognizes deferred tax assets and liabilities for the future tax consequences related to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for tax credits. The Company evaluates its deferred tax assets for recoverability based on available evidence, including assumptions about future profitability and capital gain generation. Although management believes that it is more likely than not that the deferred tax assets will be realized, some or all of the Company’s deferred tax assets could expire unused if the Company is unable to generate taxable income of an appropriate character and in a sufficient amount to utilize these tax benefits in the future. Any determination that the Company would not be able to realize all or a portion of its deferred tax assets in the future would result in a charge to earnings in the period in which the determination is made. This charge could have a material adverse effect on the Company’s results of operations and financial condition. In addition, the assumptions used to make this determination are subject to change from period to period based on changes in tax laws or variances between the Company’s projected operating performance and actual results. As a result, significant management judgment is required in assessing the possible need for a deferred tax asset valuation allowance. The changes in the estimates and assumptions used in such assessments and decisions can materially affect the Company’s results of operations and financial condition.

The carrying value of the Company’s goodwill and other intangible assets could be subject to an impairment write-down.
At December 31, 2025, the Company’s consolidated balance sheet reflected approximately $43 million of goodwill and $7 million of other intangible assets. The Company evaluates whether events or circumstances have occurred that suggest that the fair values of its goodwill and other intangible assets are below their respective carrying values. The determination that the fair values of the Company’s goodwill and other intangible assets are less than their carrying values may result in an impairment write-down. An impairment write-down would be reflected as expense and could have a material adverse effect on the Company’s results of operations during the period in which it recognizes the expense. In the future, the Company may incur impairment charges related to goodwill and other intangible assets already recorded or arising out of future acquisitions.

Uncertain economic conditions may negatively affect the Company’s business and operating results.
Uncertain economic conditions could adversely affect the Company in the form of consumer behavior and pressure on its investment portfolio. Consumer behavior could include policy cancellations, modifications, or non-renewals, which may reduce cash flows from operations and investments, may harm the Company’s financial position, and may reduce the Insurance Companies’ statutory surplus. Uncertain economic conditions also may impair the ability of the Company’s customers to pay premiums as they become due, and as a result, the Company’s bad debt reserves and write-offs could increase. It is also possible that claims fraud may increase. The Company’s investment portfolios could be adversely affected as a result of financial and business conditions affecting the issuers of the securities in the Company’s investment portfolio. In addition, declines in the Company’s profitability could result in a charge to earnings for the impairment of goodwill, which would not affect the Company’s cash flows but could decrease its earnings, and could adversely affect its stock price.

The Company may be adversely affected if economic conditions result in either inflation or deflation. In an inflationary environment, established reserves may become inadequate and increase the Company’s loss ratio, and market interest rates may rise and reduce the value of the Company’s fixed maturity portfolio. The departments of insurance may not approve premium rate increases in time for the Company to adequately mitigate inflated loss costs. In a deflationary environment, some fixed maturity issuers may have difficulty meeting their debt service obligations and thereby reduce the value of the Company’s fixed maturity portfolio; equity investments may decrease in value; and policyholders may experience difficulties paying their premiums to the Company, which could adversely affect premium revenue.

Risks Related to the Company’s Industry

The private passenger automobile insurance industry is highly competitive, and the Company may not be able to compete effectively against larger or better-capitalized companies.

The Company competes with many property and casualty insurance companies selling private passenger automobile
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insurance in the states in which the Company operates. Many of these competitors are better capitalized than the Company, have higher A.M. Best ratings, and have a larger market share in the states in which the Company operates. The superior capitalization of the competitors may enable them to offer lower rates, to withstand larger losses, and to more effectively take advantage of new marketing opportunities. The Company’s competition may also become increasingly better capitalized in the future as the traditional barriers between insurance companies and banks and other financial institutions erode and as the property and casualty industry continues to consolidate. The Company’s ability to compete against these larger, better-capitalized competitors depends on its ability to deliver superior service and its strong relationships with independent agents.

The Company may undertake strategic marketing and operating initiatives to improve its competitive position and drive growth. If the Company is unable to successfully implement new strategic initiatives or if the Company’s marketing campaigns do not attract new customers, the Company’s competitive position may be harmed, which could adversely affect the Company’s business and results of operations. Additionally, in the event of a failure of any competitor, the Company and other insurance companies would likely be required by state law to absorb the losses of the failed insurer and would be faced with an unexpected surge in new business from the failed insurer’s former policyholders.

The Company may be adversely affected by changes in the private passenger automobile insurance industry.
Approximately 60% of the Company’s direct premiums written for the year ended December 31, 2025 were generated from private passenger automobile insurance policies. Adverse developments in the market for personal automobile insurance or the personal automobile insurance industry in general, whether related to changes in competition, pricing or regulations, could cause the Company’s results of operations to suffer. The property-casualty insurance industry is also exposed to the risks of severe weather conditions, such as rainstorms, snowstorms, hail and ice storms, hurricanes, tornadoes, wild fires, sinkholes, earthquakes and, to a lesser degree, explosions, terrorist attacks, and riots. The automobile insurance business is also affected by cost trends that impact profitability. Factors which negatively affect cost trends include inflation in automobile repair costs, automobile parts costs, new and used car valuations, medical costs, and changes in non-economic costs due to changes in the legal and regulatory environments. In addition, the advent of driverless cars and usage-based insurance could materially alter the way that automobile insurance is marketed, priced, and underwritten.

The Company cannot predict the impact that changing climate conditions, including legal, regulatory and social responses thereto, may have on its business.
Various scientists, environmentalists, international organizations, regulators and other commentators believe that global climate change has added, and will continue to add, to the unpredictability, frequency and severity of natural disasters (including, but not limited to, hurricanes, tornadoes, freezes, droughts, other storms and fires) in certain parts of the world. In response, a number of legal and regulatory measures and social initiatives have been introduced in an effort to reduce greenhouse gas and other carbon emissions that may be chief contributors to global climate change. The Company cannot predict the impact that changing climate conditions, if any, will have on its business or its customers, although the impact on the Company's results of operations or financial condition of incurred losses related to natural disasters that may result from changing climate conditions is mitigated to the extent its reinsurance programs provide coverage for such losses. See "Reinsurance" in "Item 1. Business" for information regarding the Company's reinsurance programs. It is also possible that the legal, regulatory and social responses to climate change could have a negative effect on the Company’s results of operations or financial condition.

Changes in federal or state tax laws could adversely affect the Company’s business, financial condition, results of operations, and liquidity.

The Company’s financial condition, results of operations, and liquidity are dependent in part on tax policy implemented at the federal and/or state level. For example, a significant portion of the Company’s investment portfolio consists of municipal securities that receive beneficial tax treatment under applicable federal tax law. The Company’s results are also subject to federal and state tax rules applicable to dividends received from its subsidiaries and its equity holdings. Additionally, changes in tax laws could have an adverse effect on deferred tax assets and liabilities included in the Company’s consolidated balance sheets and results of operations. The Company cannot predict whether any tax legislation will be enacted in the near future or whether any such changes to existing federal or state tax law would have a material adverse effect on the Company's financial condition and results of operations.

The insurance industry is subject to extensive regulation, which may affect the Company’s ability to execute its business plan and grow its business.

The Company is subject to extensive regulation and supervision by government agencies in each of the states in which its Insurance Companies are domiciled, sell insurance products, issue policies, or manage claims. Some states impose restrictions
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or require prior regulatory approval of specific corporate actions, which may adversely affect the Company’s ability to operate, innovate, obtain necessary rate adjustments in a timely manner or grow its business profitably. These regulations provide safeguards for policyholders and are not intended to protect the interests of shareholders. The Company’s ability to comply with these laws and regulations, and to obtain necessary regulatory action in a timely manner is, and will continue to be, critical to its success. Some of these regulations include:

Required Licensing. The Company operates under licenses issued by the DOI in the states in which the Company sells insurance. If a regulatory authority denies or delays granting a new license, the Company’s ability to enter that market quickly or offer new insurance products in that market may be substantially impaired. In addition, if the DOI in any state in which the Company currently operates suspends, non-renews, or revokes an existing license, the Company would not be able to offer affected products in that state.

Transactions Between Insurance Companies and Their Affiliates. Transactions between the Insurance Companies and their affiliates (including the Company) generally must be disclosed to state regulators, and prior approval of the applicable regulator is required before any material or extraordinary transaction may be consummated. State regulators may refuse to approve or delay approval of some transactions, which may adversely affect the Company’s ability to innovate or operate efficiently.

Regulation of Insurance Rates and Approval of Policy Forms. The insurance laws of most states in which the Company conducts business require insurance companies to file insurance rate schedules and insurance policy forms for review and approval. If, as permitted in some states, the Company begins using new rates before they are approved, it may be required to issue refunds or credits to the Company’s policyholders if the new rates are ultimately deemed excessive or unfair and disapproved by the applicable state regulator. In other states, prior approval of rate changes is required and there may be long delays in the approval process or the rates may not be approved. Accordingly, the Company’s ability to respond to market developments or increased costs in that state can be adversely affected.

Restrictions on Cancellation, Non-Renewal or Withdrawal. Most of the states in which the Company operates have laws and regulations that limit its ability to exit a market, or reduce risk by cancellation or non-renewal of individual policies. For example, these states may, for public policy reasons, limit an insurer’s ability to cancel and non-renew private passenger automobile or homeowners insurance policies. They may also prohibit the Company from withdrawing one or more lines of insurance business from the state unless prior approval is received from the state DOI. In some states, the regulations restricting withdrawal extend to significant reductions in the amount of insurance written, not only to a complete withdrawal. Laws and regulations that limit the Company’s ability to cancel and non-renew policies in some states or locations and that subject withdrawal plans to prior approval requirements may restrict the Company’s ability to control its risk exposure or exit unprofitable markets, which may harm its business and results of operations.

Other Regulations. The Company must also comply with regulations involving, among other matters:
•the use of non-public consumer information and related privacy issues;
•the use of credit history in underwriting and rating;
•limitations on the ability to charge policy fees;
•limitations on types and amounts of investments;
•the payment of dividends;
•the acquisition or disposition of an insurance company or of any company controlling an insurance company;
•involuntary assignments of high-risk policies, participation in reinsurance facilities and underwriting associations, assessments and other governmental charges;
•reporting with respect to financial condition;
•periodic financial and market conduct examinations performed by state insurance department examiners; and
•the other regulations discussed in this Annual Report on Form 10-K.

The failure to comply with these laws and regulations may also result in regulatory actions, fines and penalties, and in extreme cases, revocation of the Company’s ability to do business in that jurisdiction. In addition, the Company may face individual and class action lawsuits by insured and other parties for alleged violations of certain of these laws or regulations.

In addition, from time to time, the Company may support or oppose legislation or other amendments to insurance
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regulations in California or other states in which it operates. Consequently, the Company may receive negative publicity related to its support or opposition of legislative or regulatory changes that may have a material adverse effect on the Company’s financial condition, results of operations, and liquidity.

Regulation may become more restrictive in the future, which may adversely affect the Company’s business, financial condition, and results of operations.
No assurance can be given that states will not make existing insurance-related laws and regulations more restrictive in the future or enact new restrictive laws. New or more restrictive regulation in any state in which the Company conducts business could make it more expensive for it to continue to conduct business in these states, restrict the premiums the Company is able to charge or otherwise change the way the Company does business. In such events, the Company may seek to reduce its writings in or to withdraw entirely from these states. In addition, from time to time, the United States Congress and certain federal agencies investigate the current condition of the insurance industry to determine whether federal regulation is necessary. The Company cannot predict whether and to what extent new laws and regulations that would affect its business will be adopted, the timing of any such adoption and what effects, if any, they may have on the Company’s business, financial condition, and results of operations.

Assessments and other surcharges for guaranty funds, second-injury funds, catastrophe funds, and other mandatory pooling arrangements may reduce the Company’s profitability.
Virtually all states require insurers licensed to do business in their state to bear a portion of the loss suffered by some insured parties as the result of impaired or insolvent insurance companies. Many states also have laws that established second-injury funds to provide compensation to injured employees for aggravation of a prior condition or injury which are funded by either assessments based on paid losses or premium surcharge mechanisms. In addition, as a condition to the ability to conduct business in various states, the Insurance Companies must participate in mandatory property and casualty shared-market mechanisms or pooling arrangements, which provide various types of insurance coverage to individuals or other entities that otherwise are unable to purchase that coverage from private insurers. The effect of these assessments and mandatory shared-market mechanisms or changes in them could reduce the Company’s profitability in any given period or limit its ability to grow its business.

The insurance industry faces litigation risks, which, if resolved unfavorably, could result in substantial penalties and/or monetary damages, including punitive damages. In addition, insurance companies incur material expenses defending litigation and their results of operations or financial condition could be adversely affected if they fail to accurately project litigation expenses.
Insurance companies are subject to a variety of legal actions including breach of contract claims, tort claims, fraud and misrepresentation claims, employee benefit claims, and wage and hour claims. In addition, insurance companies incur and likely will continue to incur potential liability for claims related to the insurance industry in general and to the Company’s business in particular, such as those related to allegations for failure to pay claims, termination or non-renewal of coverage, interpretation of policy language, policy sales practices, reinsurance matters, and other similar matters. Such actions can also include allegations of fraud, misrepresentation, and unfair or improper business practices and can include claims for punitive damages.

Court decisions and legislative activity may increase exposures for any of the types of claims insurance companies face. There is a risk that insurance companies could incur substantial legal fees and expenses in any of the actions companies defend in excess of amounts budgeted for defense.

The Company and the Insurance Companies are named as defendants in a number of lawsuits. Those that management believes could have a material effect on the Company's consolidated financial statements are described more fully in "Overview—B. Regulatory and Legal Matters" in "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" and Note 18. Commitments and Contingencies, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data." Litigation, by its very nature, is unpredictable and the outcome of these cases is uncertain. The precise nature of the relief that may be sought or granted in any lawsuit is uncertain and may negatively impact the manner in which the Company conducts its business, which could materially increase the Company’s legal expenses and negatively impact the results of operations. In addition, potential litigation involving new claim, coverage, and business practice issues could adversely affect the Company’s business by changing the way policies are priced, extending coverage beyond its underwriting intent, or increasing the size of claims.



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Risks Related to Technology and Cybersecurity

The Company relies on its information technology systems, and those of its service providers, to manage many aspects of its business, and any failure of these systems to function properly or any interruption in their operation could result in a material adverse effect on the Company’s business, financial condition, and results of operations.
The Company depends on the accuracy, reliability, and proper functioning of its information technology systems, networks and online sites, including systems maintained by third-party vendors with which we do business (collectively, “IT Systems”). The Company relies on these IT Systems to effectively manage many aspects of its business, including underwriting, policy acquisition, claims processing and handling, accounting, reserving and actuarial processes and policies, and to maintain its policyholder data. We and our providers face various and evolving cybersecurity risks that threaten the confidentiality, integrity and availability of our IT Systems and data, including personal information, that we process. These risks include the risk of a cyber incident, which has generally increased as the number, intensity and sophistication of attempted attacks by threat actors have increased globally, especially given the use of more advanced hacking tools and techniques and the use of artificial intelligence, including by computer hackers, state-sponsored actors, information service interruptions and cyber terrorists, opportunistic hackers and hacktivists, as well as through diverse attack vectors, such as social engineering/phishing, malware (including ransomware), malfeasance by insiders, human or technological error, and as a result of bugs, misconfigurations or exploited vulnerabilities in software or hardware. Techniques used in cyber incidents evolve frequently, may originate from less regulated and remote areas of the world and be difficult to detect and may not be recognized until launched against a target. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, making it impossible for us to entirely eliminate this risk.
Like many companies, we have been, and expect to continue to be, the target of cyber incidents. While these incidents have not had a material impact to date, as our reliance on technology increases, so do the risks of a security incident. For example, unauthorized parties, whether within or outside the Company, may disrupt or gain access to our IT Systems, or those of third parties with whom we do business, through human error, misfeasance, fraud, trickery, or other forms of deceit, including break-ins, use of stolen credentials, social engineering, phishing, computer viruses or other malicious codes, and similar means of unauthorized and destructive tampering. Though we have adopted cybersecurity measures, such measures cannot provide absolute security, and there can be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully complied with or effective in protecting our systems and information.

The failure of hardware or software that supports the Company’s information technology systems, the loss of data contained in the systems, or any delay or failure in the full deployment of the Company’s information technology systems could disrupt its business and could result in decreased premiums, increased overhead costs, and inaccurate reporting, all of which could have a material adverse effect on the Company’s business, financial condition, and results of operations.

In addition, despite system redundancy, the implementation of security measures, and the existence of a disaster recovery plan for the Company’s information technology systems, these systems are vulnerable to damage or interruption from:
•earthquake, fire, flood and other natural disasters;
•terrorist attacks and attacks by computer viruses, hackers, phishing, ransomware, or other exploits;
•power loss in areas not covered by backup power generators;
•unauthorized access; and
•computer systems, internet, telecommunications or data network failure.

An actual or perceived IT System failure, accident, or security breach could result in a material disruption to the Company’s business and result in the theft, misuse, loss, corruption or improper use or disclosure of data, including personal information or confidential business information. In addition, substantial costs may be incurred to remedy the damages caused by these disruptions. Following implementation of IT Systems, the Company may from time to time install new or upgraded business management systems. To the extent that a critical system fails or is not properly implemented and the failure cannot be corrected in a timely manner, the Company may experience disruptions to the business that could have a material adverse effect on the Company’s results of operations. This could result in government investigations, lawsuits (including class actions), enforcement actions and other legal and financial liability, and/or loss of confidence in the availability and security of our products and services, all of which could seriously harm our reputation and brand and impair our ability to attract and retain clients. Cyberattacks could also compromise our own trade secrets and other sensitive information and result in such information being disclosed to others and becoming less valuable, which could negatively affect our business. Although the Company seeks to mitigate the impact and severity of potential cyber threats through cyber insurance coverage, not every risk
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or liability can be insured, and for risks that are insurable, the policy limits and terms of coverage reasonably obtainable in the market may not be sufficient to cover all actual losses or liabilities incurred. In addition, disputes with insurance carriers, including over policy terms, reservation of rights, applicability of coverage (including exclusions), compliance with provisions (including notice) and/or insolvency of insurance carriers, may significantly affect the amount or timing of recovery.

Cybersecurity risks and the failure to maintain the confidentiality, integrity, and availability of internal or policyholder systems and data could result in damages to the Company’s reputation and/or subject it to expenses, fines or lawsuits.

The Company collects and retains large volumes of internal and policyholder data, including personally identifiable information, for business purposes including underwriting, claims and billing purposes, and relies upon the various information technology systems that enter, process, summarize and report such data. The Company also maintains personally identifiable information about its employees. The confidentiality and protection of the Company’s policyholder, employee and Company data are critical to the Company’s business. The Company’s policyholders and employees have a high expectation that the Company will adequately protect their personal information. As such, we are subject to various federal, state and local laws, regulations and industry standards. The regulatory environment, as well as the requirements imposed by the payment card industry and insurance regulators, governing information, security and privacy laws is increasingly demanding and continues to evolve, resulting in a patchwork of legislation that can be subject to differing interpretation. Maintaining compliance with applicable information security and privacy regulations may increase the Company’s operating costs and adversely impact its ability to market products and services to its policyholders. Any failure or perceived failure by us to comply with laws, regulations, policies or regulatory guidance relating to privacy or data security may result in governmental investigations and enforcement actions, litigation, fines and penalties or adverse publicity, and could cause our customers and consumers to lose trust in us, which could have an adverse effect on our reputation and business.

General Risk Factors

The Company is controlled by a small number of shareholders who will be able to exert significant influence over matters requiring shareholder approval, including change of control transactions.
George Joseph and Gloria Joseph collectively own more than 50% of the Company’s common stock. Accordingly, George Joseph and Gloria Joseph have the ability to exert significant influence on the actions the Company may take in the future, including change of control transactions. From time to time, certain institutional investors also each own over 5% of the Company's common stock. This concentration of ownership may conflict with the interests of the Company’s other shareholders and lenders.

Future equity or debt financing may affect the market price of the Company’s common stock and rights of the current shareholders, and the future exercise of options and granting of shares will result in dilution in the investment of the Company’s shareholders.
The Company may raise capital in the future through the issuance and sale of its common stock or debt securities. The Company cannot predict what effect, if any, such future financing will have on the market price of its common stock. Sales of substantial amounts of its common stock in the public market or issuance of substantial amounts of debt securities could adversely affect the market price of the Company’s outstanding common stock, and may make it more difficult for shareholders to sell common stock at a time and price that the shareholder deems appropriate. Furthermore, holders of some of the Company's securities may have rights, preferences, and privileges that are senior to those of the Company’s current shareholders. In addition, the Company has issued and may issue options to purchase shares of its common stock as well as restricted stock units ("RSUs") to incentivize its executives and key employees. In the event that any options to purchase common stock are exercised or any shares of common stock are issued when the RSUs vest, shareholders will suffer dilution in their investment.

Applicable insurance laws may make it difficult to effect a change of control of the Company or the sale of any of its Insurance Companies.
Before a person can acquire control of a U.S. insurance company or any holding company of a U.S. insurance company, prior written approval must be obtained from the DOI of the state where the insurer is domiciled. Prior to granting approval of an application to acquire control of the insurer or holding company, the state DOI will consider a number of factors relating to the acquirer and the transaction. These laws and regulations may discourage potential acquisition proposals and may delay, deter or prevent a change of control of the Company or the sale by the Company of any of its Insurance Companies, including transactions that some or all of the Company’s shareholders might consider to be desirable.

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Although the Company has consistently paid cash dividends in the past, it may not be able to pay or increase cash dividends in the future.
The Company has consistently paid cash dividends since the public offering of its common stock in November 1985 and has consistently increased the dividend per share until 2022. As a result of challenging business conditions, the Company reduced the dividend per share during 2022 for the first time since 1985. Future cash dividends will depend upon a variety of factors, including the Company’s profitability, financial condition, capital needs, future prospects, and other factors deemed relevant by the Board of Directors. The Company’s ability to pay dividends or increase the dividend per share may also be limited by the ability of the Insurance Companies to make distributions to the Company, which may be restricted by financial, regulatory or tax constraints, and by the terms of the Company’s debt instruments. In addition, there can be no assurance that the Company will pay dividends or increase the dividend per share even if the necessary financial and regulatory conditions are met and if sufficient cash is available for distribution.

Changes in accounting standards issued by the Financial Accounting Standards Board (the "FASB") or other standard-setting bodies may adversely affect the Company’s consolidated financial statements.
The Company’s consolidated financial statements are subject to the application of GAAP, which is periodically revised and/or expanded. Accordingly, the Company is required to adopt new or revised accounting standards from time to time issued by recognized authoritative bodies, including the FASB. It is possible that future changes the Company is required to adopt could change the current accounting treatment that the Company applies to its consolidated financial statements and that such changes could have a material adverse effect on the Company’s financial condition and results of operations.

The Company’s disclosure controls and procedures may not prevent or detect acts of fraud.

The Company’s disclosure controls and procedures are designed to reasonably assure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to management and is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. The Company’s management, including its Chief Executive Officer and Chief Financial Officer, believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, the Company cannot provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by an unauthorized override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and the Company cannot assure that any design will succeed in achieving its stated goals under all potential future conditions. Accordingly, because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected.

Failure to maintain an effective system of internal control over financial reporting may have an adverse effect on the Company’s stock price.
The Company is required to include in its Annual Report on Form 10-K a report by its management regarding the effectiveness of the Company’s internal control over financial reporting, which includes, among other things, an assessment of the effectiveness of the Company’s internal control over financial reporting as of the end of its fiscal year, including a statement as to whether or not the Company’s internal control over financial reporting is effective. This assessment must include disclosure of any material weaknesses in the Company’s internal control over financial reporting identified by management. Areas of the Company’s internal control over financial reporting may require improvement from time to time. If management is unable to assert that the Company’s internal control over financial reporting is effective now or in any future period, or if the Company’s independent auditors are unable to express an opinion on the effectiveness of those internal controls, investors may lose confidence in the accuracy and completeness of the Company’s financial reports, which could have an adverse effect on the Company’s stock price.

The ability of the Company to attract, develop and retain talented employees, managers and executives, and to maintain appropriate staffing levels, is critical to the Company’s success.

The Company is constantly hiring and training new employees and seeking to retain current employees. An inability to attract, retain and motivate the necessary employees for the operation and expansion of the Company’s business could hinder its ability to conduct its business activities successfully, develop new products and attract customers.

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The Company’s success also depends upon the continued contributions of its executive officers, both individually and as a group. The Company’s future performance will be substantially dependent on its ability to retain and motivate its management team. The loss of the services of any of the Company’s executive officers could prevent the Company from successfully implementing its business strategy, which could have a material adverse effect on the Company’s business, financial condition, and results of operations.

Pandemics, epidemics, widespread health emergencies, or outbreaks of infectious diseases could disrupt the Company's business and adversely affect its results of operations and financial condition.

The Company's operations may be subject to disruptions due to the occurrence of public health emergencies, such as the COVID-19 pandemic, or other similar unexpected events, some of which may be intensified by the effects of a government response to such an event. In March 2020, the outbreak of COVID-19 was recognized as a pandemic by the World Health Organization and shortly thereafter, the President of the United States declared a National Emergency. The COVID-19 pandemic has caused significant economic and financial turmoil both in the United States and globally.

High inflation levels could have adverse consequences for the Company, the insurance industry and the U.S. economy generally.

The U.S. economy experienced elevated levels of inflation in 2022. Although the inflation moderated in 2023 through 2025, it has created a heightened level of risk for the Company, the insurance industry and the U.S. economy generally. Rising inflation may impact the reliability of the Company's loss reserve estimates and its ability to accurately price insurance products, and may create additional volatility in the fair value of its investments. Additionally, regulatory agencies, such as various state Departments of Insurance, the U.S. government and Federal Reserve may be slow to approve rate changes or adopt measures to attempt to control inflation during the highly inflationary periods, which could adversely affect the Company's ability to generate profits and cash flow. Continuing significant inflation could have a prolonged effect on the U.S. economy and could in turn increase the Company's operating and loss costs due to higher labor and materials costs, and may negatively affect its business, financial condition and results of operations.

The Company's business, financial condition and results of operations could be adversely affected by geopolitical conflicts and related disruptions in the global economy, including the imposition of tariffs.

The escalation of geopolitical conflicts and tensions in various parts of the world, including increased trade barriers or restrictions on global trade, could result in, among other things, heightened cybersecurity threats, prolonged supply chain disruptions, protracted or increased inflation, lower consumer demand, fluctuations in interest rates, and increased volatility in financial markets, which could adversely affect the Company's business, financial condition and results of operations.

Effective February 4, 2025, the United States announced additional tariffs for goods imported into the United States from Mexico, Canada, and China, which was followed by a series of other tariff-related announcements by the United States and other countries. Although the Company cannot predict what additional actions may ultimately be taken by the United States or other governments with respect to tariffs or trade relations, such actions could increase the Company's loss costs due to higher repair and replacement costs for insured properties and cause a decline in the value of its investment portfolio due to disruptions in financial markets, which could adversely affect the Company's business, financial condition and results of operations.

Item 1B.Unresolved Staff Comments
None.

Item 1C.Cybersecurity
Risk Management and Strategy
A.Processes for Assessing, Identifying, and Managing Material Risks from Cybersecurity Threats
The Company has developed and implemented a cybersecurity risk management program designed to protect the confidentiality, integrity, and availability of its critical systems and information. The Company's cybersecurity risk management is integrated into and embedded in its overall enterprise risk management framework, and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas.
The Enterprise Risk Management Committee oversees cybersecurity risks Company-wide while the Company’s Chief Technology Officer (“CTO”), a member of the Enterprise Risk Management Committee, oversees the Information Security
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business unit's cybersecurity management programs and activities. The Company’s cybersecurity risk management program includes the following key elements:
•formal cybersecurity risk assessment designed to help identify material cybersecurity risks to the Company’s critical systems, information, services, and its broader enterprise information technology environment led by the Company's Information Security business unit and reported to its Enterprise Risk Management Committee;
•a team comprised of information security, information technology, infrastructure, and compliance personnel responsible for directing the Company’s cybersecurity risk assessment and security processes and its cybersecurity incident response;
•third-party cybersecurity service provider, as needed, to conduct independent review and testing of the Company's cybersecurity risks and report to the Company;
•systems for protecting information technology systems and monitoring for suspicious events, such as threat protection, firewall and anti-virus software;
•cybersecurity awareness and prevention training for all employees;
•a Security Incident Response Plan designed to respond to cybersecurity incidents, which is regularly tested;
•a Vendor Risk Management Process for vetting third party service providers with access to the Company’s information technology systems.
The Information Security business unit regularly evaluates the Company's cybersecurity risk profile and reports to the Board of Directors (the “Board”). In the event that a significant cybersecurity incident is identified, the Company engages a third-party cybersecurity incident response consultant, as needed, to provide an independent evaluation of the incident.
B.Oversight of Cybersecurity Risks Associated with Third Party Service Providers
The Company oversees and identifies material risks from cybersecurity threats related to its use of third-party service providers in accordance with its Vendor Risk Management Process. The contracts with service providers are reviewed during the onboarding process, renewal periods, and as necessary. The contracts require service providers to report cybersecurity incidents that impact the Company's data or information systems or that can otherwise disrupt its operations to the Company on a timely basis.
C.Impact of Cybersecurity Threats on Business Strategy and Results of Operations
The Company has experienced cybersecurity incidents in the past, and has been impacted by cybersecurity incidents experienced by its service providers, but none has materially affected the Company's operations. The Company has not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected the Company, including its operations, business strategy, results of operations, or financial condition. The Company faces certain ongoing risks from cybersecurity threats that, if realized, are reasonably likely to materially affect the Company, including its operations, business strategy, results of operations, or financial condition. See "Risks Related to Technology and Cybersecurity" in "Part I – Item 1A. Risk Factors" for additional information.

Governance
A.Board of Directors' Oversight of Risks from Cybersecurity Threats
The Company’s Board considers cybersecurity risk as critical to the enterprise. The full Board oversees the Company’s Enterprise Risk Management program which incorporates cybersecurity risks together with other top operational, reporting and compliance risks the Company manages. The full Board is kept apprised by Management of the Company’s cybersecurity risk assessment results, and an escalation process exists to inform the Board of high-severity cybersecurity incidents that may occur. In addition, the Board periodically engages independent third-party technology experts to test the Company’s information technology systems, including cybersecurity.
The Company's Enterprise Risk Management Committee provides the Board with an overview of cybersecurity risks regularly. Additionally, the Company's Chief Executive Officer (“CEO”) provides the Board with an Information Security Incident Report for Board meetings, which summarizes new incidents that did not require "off-cycle" escalation to the Board, and status updates on previously reported high severity incidents, as well as a cybersecurity incident analysis report issued by a third-party cybersecurity service provider.
B.Management’s Role in Assessing and Managing Material Risks from Cybersecurity Threats
The Company's Information Security business unit primarily manages the day-to-day operations of monitoring cybersecurity risks to the Company's information systems, takes prevention, detection, and remediation measures for cybersecurity incidents, makes initial assessment of reported cybersecurity incidents, and reports such incidents to the
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Company's CEO, Chief Operating Officer (“COO”), CTO, Board and Enterprise Risk Management Committee as well as certain regulatory bodies, as needed. The following five management personnel are primarily responsible for assessing and managing the Company's material risks from cybersecurity threats:
•Gabriel Tirador, Chief Executive Officer: The Company’s CEO, along with its COO, oversees the Technology team who monitors the Company’s information technology systems for suspicious events. The Company’s CEO reports to the Board regarding cybersecurity incidents and issues. The Company’s CEO, COO and CTO oversee the use of third-party cybersecurity consultants by the Information Security business unit to engage in periodic evaluations. Mr. Tirador has over 30 years' experience in the property and casualty insurance industry and in the Company and is an inactive Certified Public Accountant. As CEO of the Company, he has overseen its Technology business unit for over 20 years, among other business units.
•Victor Joseph, President and Chief Operating Officer: The Company’s President and COO oversees the technology team who monitors the Company’s information technology systems for suspicious events. Mr. Joseph has overseen the technology team since 2022. Mr. Joseph has been employed by the Company in various capacities since 2009, and was appointed Executive Vice President and COO in January 2022 and President and COO in January 2024.
•Theodore R. Stalick, Senior Vice President and Chief Financial Officer: The Company’s CFO oversees its enterprise risk management program which, among others, includes oversight of cybersecurity risk management and serves as Chairperson of the Company's Enterprise Risk Management Committee. Mr. Stalick has been the Company's CFO since 2001. Mr. Stalick is a Certified Public Accountant and has a Bachelors Degree in Business Administration, Accounting and Finance concentration, and an MBA, Business Analytics concentration.
•Wilson Pang, Vice President and Chief Technology Officer: The Company’s CTO regularly provides the Board with updates on cybersecurity risk management or significant reported cybersecurity incidents. The Company’s CTO works with the Company’s CEO, COO and Head of Information Security to determine the severity of cybersecurity incidents. The Company’s CTO also works with its Head of Information Security to direct action in the event of a severe cybersecurity incident. Mr. Pang has over 20 years’ experience in the technology industry. He has served in Chief Technology Officer and Chief Data Officer roles in several public companies and has deep expertise in technology, data, and artificial intelligence. He has a Master’s and a Bachelor’s Degree in electrical engineering.
•Dustin Howard, Head of Information Security: The Company’s Head of Information Security supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external cybersecurity service providers; and alerts and reports produced by security tools deployed in the information technology environment. The Company’s Head of Information Security also oversees the creation of remediation action plans with the affected business units. Mr. Howard has over 30 years’ experience managing various aspects of information technology, and has extensive expertise in information security, compliance, and information technology infrastructure and service delivery. He has served in Head of Information Security, Chief Information Officer and Vice President roles in several public companies and has maintained Certified Information Systems Security Professional (“CISSP”) certification since 2001. He has a Bachelor’s Degree in Business Administration and a Master’s Degree in Information Systems.
The five management personnel above also serve in the Company's Enterprise Risk Management Committee and are informed about and discuss updates to the cybersecurity risk management programs and cybersecurity incidents, including any prevention and detection measures as well as mitigation and remediation measures for any reported cybersecurity incidents. The Enterprise Risk Management Committee oversees the Company's overall risk management processes that include oversight of material risks from cybersecurity threats. The CEO and CFO are also members of the Company's Disclosure Committee. The CTO and Head of Information Security participate in Disclosure Committee meetings, as needed, to facilitate discussion and provide information on cybersecurity incidents reported. The CEO, CTO and Head of Information Security provide the Board with information and updates on cybersecurity risks and incidents as in-house technology and cybersecurity experts during Board meetings or as needed.
Depending on the nature and severity of the reported cybersecurity incidents, the Enterprise Risk Management Committee may recommend activation of the Crisis Management Plan under the Company's Business Continuity Management Program. The Disclosure Committee is informed by the CEO of significant cybersecurity incidents for purposes of determining materiality.




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Item 2.Properties
The Company owns the following buildings which support all business segments. Space not used by the Company may be leased to independent third party tenants.
LocationPurposeSize in
Square Feet
Percent Leased to Third Parties at
December 31, 2025
Brea, CAHome office and I.T. facilities80,000 — %
Los Angeles, CAExecutive offices41,000 5 %

The Company leases additional office space for operations. In addition, the Company owns 5.9 acres of land in Rancho Cucamonga, California. The Company’s properties are well maintained, adequately meet its needs, and are being utilized for their intended purposes.

Office location is not crucial to the Company’s operations. Most of its workforce works from home as a result of the "Mercury's My Workplace" policy that allows most of its employees to work from anywhere in the U.S.

Item 3.Legal Proceedings
The Company is, from time to time, named as a defendant in various lawsuits or regulatory actions incidental to its insurance business. The majority of lawsuits brought against the Company relate to insurance claims that arise in the normal course of business and are reserved for through the reserving process. For a discussion of the Company’s reserving methods, see "Overview-C. Critical Accounting Estimates" in "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" and Note 1. Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data."

The Company also establishes accruals for estimated liabilities for non-insurance claims related lawsuits, regulatory actions, and other contingencies when the Company believes a loss is probable and is able to estimate its potential exposure. For loss contingencies believed to be reasonably possible, the Company also discloses the nature of the loss contingency and an estimate of the possible loss, range of loss, or a statement that such an estimate cannot be made. In addition, the Company accrues for anticipated legal defense costs associated with such lawsuits and regulatory actions. While actual losses may differ from the amounts recorded and the ultimate outcome of the Company’s pending actions is generally not yet determinable, the Company does not believe that the ultimate resolution of currently pending legal or regulatory proceedings, either individually or in the aggregate, will have a material adverse effect on its financial condition or cash flows.

In all cases, the Company vigorously defends itself unless a reasonable settlement appears appropriate. For a discussion of legal matters, see "Overview—B. Regulatory and Legal Matters" in "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" and Note 18. Commitments and Contingencies, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data," which is incorporated herein by reference.

There are no environmental proceedings arising under federal, state, or local laws or regulations to be discussed.

Item 4.Mine Safety Disclosures
Not applicable.
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PART II
 
Item 5.     Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information
The shares of the Company's common stock are listed and traded on the New York Stock Exchange and the New York Stock Exchange Texas (trading symbol: MCY).
The closing price of the Company’s common stock on February 12, 2026 was $94.76.
Holders
As of February 12, 2026, there were approximately 133 holders of record of the Company’s common stock.
Dividends

For financial statement purposes, the Company records dividends on the declaration date. The continued payment and amount of cash dividends will depend upon the Company’s operating results, overall financial condition, capital requirements, and general business conditions.

Holding Company Act
Pursuant to the Holding Company Act, California-domiciled insurance companies are required to notify the California DOI of any dividend after declaration, but prior to payment. There are similar limitations imposed by other states on the Insurance Companies’ ability to pay dividends. As of December 31, 2025, the Insurance Companies are permitted to pay in 2026, without obtaining DOI approval for extraordinary dividends, $448 million in dividends to Mercury General, of which $422 million may be paid by the California Companies.

For a discussion of certain restrictions on the payment of dividends to Mercury General by some of its insurance subsidiaries, see Note 13. Dividends, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data."

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Performance Graph

The following graph compares the cumulative total shareholder returns on the Company’s common stock (trading symbol: MCY) with the cumulative total returns on the Standard and Poor’s 500 Composite Stock Price Index ("S&P 500 Index") and the Company’s industry peer group (S&P 500 Property & Casualty Insurance Index) over the last five years. The graph assumes an investment of $100 on December 31, 2020 in each of the Company’s Common Stock, the S&P 500 Index and the industry peer group and the reinvestment of all dividends.
 
2804

202020212022202320242025
Mercury General$100.00 $106.18 $71.54 $81.22 $148.04 $213.25 
S&P 500 Property & Casualty Insurance Index100.00 119.28 141.79 157.12 212.86 234.32 
S&P 500 Index100.00 128.71 105.40 133.10 166.40 196.16 

Recent Sales of Unregistered Securities
None.
Share Repurchases
The Company does not currently have any share repurchases authorized by the Board. The Company has not repurchased any of its Common Stock since 2000.

Item 6.Reserved
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Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-looking Statements
    
    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, including subrogation recovery estimates; 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 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; effects of changing climate conditions; pandemics, epidemics, widespread health emergencies, or outbreaks of infectious diseases; court decisions and trends in litigation and health care and auto repair costs; changes in global trade policies, including trade barriers or restrictions; and legal, cybersecurity, regulatory and litigation risks.

    From time to time, forward-looking statements are also included in the Company’s quarterly reports on Form 10-Q and current reports on Form 8-K, in press releases, in presentations, on its web site, and in other materials released to the public. Investors are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K or, in the case of any document the Company incorporates by reference, any other report filed with the SEC or any other public statement made by the Company, the date of the document, report or statement. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information or future events or otherwise.

OVERVIEW
A. General
The operating results of property and casualty insurance companies are subject to significant quarter-to-quarter and year-to-year fluctuations due to the effect of competition on pricing, the frequency and severity of losses, the effect of weather and natural disasters on losses, general economic conditions, the general regulatory environment in states in which an insurer operates, state regulation of insurance including premium rates, changes in fair value of investments, and other factors such as changes in tax laws. The property and casualty insurance industry has been highly cyclical, with periods of high premium rates and shortages of underwriting capacity followed by periods of severe price competition and excess capacity. These cycles can have a significant impact on the Company’s ability to grow and retain business.

The Company is headquartered in Los Angeles, California and writes primarily personal automobile lines of business selling policies through a network of independent agents, 100% owned insurance agents and direct channels, in 11 states: Arizona, California, Florida, Georgia, Illinois, Nevada, New Jersey, New York, Oklahoma, Texas, and Virginia. The Company also offers homeowners, commercial automobile, commercial property, mechanical protection, fire, and umbrella insurance. Private passenger automobile lines of insurance business accounted for approximately 60% of the $6.0 billion of the Company’s direct premiums written in 2025, and approximately 86% of the private passenger automobile premiums were written in California. 

This section discusses some of the relevant factors that management considers in evaluating the Company’s performance, prospects, and risks. It is not all-inclusive and is meant to be read in conjunction with the entirety of management’s discussion and analysis, the Company’s consolidated financial statements and notes thereto, and all other items contained within this Annual Report on Form 10-K.


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2025 Financial Performance Summary
The Company’s net income for the year ended December 31, 2025 was $541.1 million, or $9.77 per diluted share, compared to $468.0 million, or $8.45 per diluted share, for the same period in 2024. Included in net income was $328.7 million of pre-tax net investment income that was generated during 2025 on a portfolio of $6.6 billion, at fair value, at December 31, 2025, compared to $280.0 million of pre-tax net investment income that was generated during 2024 on a portfolio of $6.1 billion, at fair value, at December 31, 2024. Also included in net income were pre-tax net realized investment gains of $131.4 million and $88.7 million in 2025 and 2024, respectively, and pre-tax catastrophe losses, net of reinsurance and reinstatement premiums earned, of approximately $608.6 million and $277.0 million in 2025 and 2024, respectively. The Company’s operating results and growth have allowed it to consistently generate positive cash flow from operations, which was approximately $1,087 million and $1,037 million in 2025 and 2024, respectively. 

The Company continued its marketing efforts to enhance name recognition and lead generation in 2025, and increased the spending for advertising and marketing. The Company believes that its marketing efforts and broad independent agent distribution network, combined with its ability to maintain relatively low prices and a strong reputation, make its insurance products competitive in California and in other states.

The Company believes its thorough underwriting process gives it an advantage over its competitors. The Company’s agent relationships and underwriting and claims processes are its most important competitive advantages.

Economic and Industry Wide Factors
•Regulatory Uncertainty—The insurance industry is subject to strict state regulation and oversight and is governed by the laws of each state in which each insurance company operates. State regulators generally have substantial power and authority over insurance companies including, in some states, approving rate changes and rating factors, restricting cancellation and non-renewal of insurance policies, and establishing minimum capital and surplus requirements. In many states, insurance commissioners may emphasize different agendas or interpret existing regulations differently than previous commissioners. There is no certainty that current or future regulations and the interpretation of those regulations by insurance commissioners and the courts will not have an adverse impact on the Company.
•Cost Uncertainty—Because insurance companies pay claims after premiums are collected, the ultimate cost of an insurance policy is not known until well after the policy revenues are earned. Consequently, significant assumptions are made when establishing insurance rates and loss reserves. While insurance companies use sophisticated models and experienced actuaries to assist in setting rates and establishing loss reserves, there can be no assurance that current rates or current reserve estimates will be adequate. Furthermore, there can be no assurance that insurance regulators will approve rate increases when the Company’s actuarial analyses indicate that they are needed.
•Economic Conditions—The Company’s financial condition, results of operations, and liquidity may be negatively impacted by global, national and local economic conditions, such as recessions, increased levels of unemployment, inflation, and large fluctuations in interest rates. Further, volatility in global capital markets could adversely affect the Company’s investment portfolio. The Company is not able to predict the timing and effect of these factors, or their duration and severity.
•Inflation—The largest cost component for automobile insurers is losses, which include medical, replacement automobile parts, and labor costs. There can be significant variation in the overall increases in medical cost inflation, and it is often years after the respective fiscal period ends before sufficient claims have closed for the inflation rate to be known with a reasonable degree of certainty. Therefore, it can be difficult to establish reserves and set premium rates, particularly when actual inflation rates may be higher or lower than anticipated.
•Loss Frequency—Another component of overall loss costs is loss frequency, which is the number of claims per risk insured. Loss frequency trends are affected by many factors such as fuel prices, the economy, the prevalence of distracted driving, and collision avoidance and other technology in vehicles.
•Underwriting Cycle and Competition—The property and casualty insurance industry is highly cyclical, with alternating hard and soft market conditions. The Company believes that the automobile insurance market in most states went through a transitional period from hard to softening market conditions during 2025 as many insurance carriers experienced improved profitability and increased competition, with inflation easing and rates stabilizing.

Technology

The Company has invested in improvements to automation, customer and agent experience, internal process efficiencies,
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and cybersecurity protections in 2025. In 2026, the Company expects to continue to invest in customer and agent experience, automation, cybersecurity, and in the decommissioning of legacy systems.
B. Regulatory and Legal Matters

The process for implementing rate changes varies by state. For more detailed information related to insurance rate approval, see "Item 1. Business—Regulation."

In late 2024, as part of the California insurance commissioner’s “Sustainable Insurance Strategy,” the California DOI issued two regulations that may impact how insurers price and write certain of their California property insurance policies: one allowing insurers to incorporate catastrophe modeling into rate-making with a requirement for them to align their share of insured properties in distressed wildfire-prone areas of the state to at least 85% of their state-wide market share, which may be increased by 5% per year, if necessary, until that level is reached; and the other allowing insurers to incorporate reinsurance costs into rate-making for certain specific catastrophe perils and wildfire exposures when meeting the same requirement governing the use of catastrophe modeling. The California insurance commissioner has also implemented changes to the California FAIR Plan, expanding coverage offerings and changing the assessment and recoupment processes in order to enhance market stability: the FAIR Plan’s member insurers may now request the California insurance commissioner’s prior approval to collect temporary supplemental fees from their own policyholders in order to recoup up to 50% of amounts assessed up to $1 billion in aggregate assessments in the industry and 100% of all amounts assessed over that $1 billion threshold for each of personal and commercial lines of insurance business, and 100% of all amounts assessed over $2 billion in aggregate assessments in the industry for the combined personal and commercial lines of insurance business. In December 2025, the California DOI approved the Company's rate application, which incorporates catastrophe modeling and reinsurance costs into its ratemaking in accordance with the new regulations. The Company will adhere to the market-share requirements when the new rating plan is effective in July 2026.

During the first quarter of 2025, the Company was assessed $50 million by the California FAIR Plan to strengthen the FAIR Plan's capital position following the significant losses resulting from the Palisades and Eaton wildfires in January 2025. The Company has received approval from the California DOI to recoup $25 million through temporary supplemental fees from its policyholders, as allowed under the changes to the California FAIR Plan described above.

During 2025, the Company implemented rate changes in 11 states. The following are recent rate increases approved by the California DOI for lines of insurance business that accounted for 5% or more of the Company's total net premiums earned in 2025:

•In January 2024, the California DOI approved a 22.5% rate increase for MIC and a 3.8% rate increase for CAIC on the private passenger automobile line of insurance business. These rate increases became effective in February 2024. The private passenger automobile line of insurance business of MIC and CAIC represented approximately 49% and 6%, respectively, of the Company's total net premiums earned in 2025.
•In March 2024, the California DOI approved a 6.99% rate increase on the California homeowners line of insurance business. This rate increase became effective in May 2024. 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 addition, in December 2025, the California DOI approved a 6.9% rate increase on the California homeowners line of insurance business. This rate increase is expected to become effective in July 2026. The California homeowners line of insurance business represented approximately 15% of the Company's total net premiums earned in 2025.

•In April 2024, the California DOI approved a 14.9% rate increase on the California commercial automobile line of insurance business. This rate increase became effective in July 2024. In December 2024, the California DOI approved a 15.6% rate increase on the California commercial automobile line of insurance business. This rate increase became effective in February 2025. In addition, in August 2025, the California DOI approved a 9.6% rate increase on the California commercial automobile line of insurance business. This rate increase became effective in November 2025. The California commercial automobile line of insurance business represented approximately 5% of the Company's total net premiums earned in 2025.

The Company is, from time to time, named as a defendant in various lawsuits or regulatory actions incidental to its insurance business. The majority of lawsuits brought against the Company relate to insurance claims that arise in the normal course of business and are reserved for through the reserving process. For a discussion of the Company’s reserving methods, see "Critical Accounting Estimates" below and Note 1. Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data."

The Company also establishes accruals for estimated liabilities for non-insurance claims related lawsuits, regulatory
35

actions, and other contingencies when the Company believes a loss is probable and is able to estimate its potential exposure. For material loss contingencies believed to be reasonably possible, the Company also discloses the nature of the loss contingency and an estimate of the possible loss, range of loss, or a statement that such an estimate cannot be made. In addition, the Company accrues for anticipated legal defense costs associated with such lawsuits and regulatory actions. While actual losses may differ from the amounts recorded and the ultimate outcome of the Company’s pending actions is generally not yet determinable, the Company does not believe that the ultimate resolution of currently pending legal or regulatory proceedings, either individually or in the aggregate, will have a material adverse effect on its financial condition or cash flows.

For a discussion of additional regulatory and legal matters, see Note 18. Commitments and Contingencies of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data." In all cases, the Company vigorously defends itself unless a reasonable settlement appears appropriate.

C. Critical Accounting Estimates

Loss and Loss Adjustment Expense Reserves ("Loss Reserves")

Preparation of the Company’s consolidated financial statements requires management’s judgment and estimates. The most significant is the estimate of loss reserves. Estimating loss reserves is a difficult process as many factors can ultimately affect the final settlement of a claim and, therefore, the loss reserve that is required. A key assumption in estimating loss reserves is the degree to which the historical data used to analyze reserves will be predictive of ultimate claim costs on incurred claims. Changes in the regulatory and legal environments, results of litigation, medical costs, the cost of repair materials, and labor rates, among other factors, can impact this assumption. In addition, time can be a critical part of reserving determinations since the longer the span between the incidence of a loss and the payment or settlement of a claim, the more variable the ultimate settlement amount could be. Accordingly, short-tail liability claims, such as property damage claims, tend to be more reasonably predictable than long-tail liability claims.

The Company calculates a loss reserve point estimate rather than a range. There is inherent uncertainty with estimates and this is particularly true with loss reserve estimates. This uncertainty comes from many factors which may include changes in claims reporting and settlement patterns, changes in the regulatory and legal environments, uncertainty over inflation rates, and uncertainty for unknown items. The Company does not make specific provisions for these uncertainties, rather it considers them in establishing its loss reserve by looking at historical patterns and trends and projecting these out to current loss reserves. The underlying factors and assumptions that serve as the basis for preparing the loss reserve estimate include paid and incurred loss development factors, expected average costs per claim, inflation trends, expected loss ratios, industry data, and other relevant information such as subrogation recoverable.

The Company also engages independent actuarial consultants to review the Company’s loss reserves and to provide the annual actuarial opinions required under state statutory accounting requirements. The Company analyzes loss reserves quarterly primarily using the incurred loss method, paid loss method, and average severity method coupled with the claim count development method, as described below. When deciding among methods to use, the Company evaluates the credibility of each method based on the maturity of the data available and the claims settlement practices for each particular line of insurance business or coverage within a line of insurance business. The Company may also evaluate qualitative factors such as known changes in laws or legal rulings that could affect claims handling or other external environmental factors or internal factors that could affect the settlement of claims. When establishing the loss reserve, the Company generally analyzes the results from all of the methods used rather than relying on a single method. While these methods are designed to determine the ultimate losses on claims under the Company’s policies, there is inherent uncertainty in all actuarial models since they use historical data to project outcomes. The Company believes that the techniques it uses provide a reasonable basis in estimating loss reserves.

•The incurred loss method analyzes historical incurred case loss (case reserves plus paid losses) development to estimate ultimate losses. The Company applies development factors against current case incurred losses by accident period to calculate ultimate expected losses. The Company believes that the incurred loss method provides a reasonable basis for evaluating ultimate losses, particularly in the Company’s larger, more established lines of insurance business which have a long operating history.
•The paid loss method analyzes historical payment patterns to estimate the amount of losses yet to be paid.
•The average severity method analyzes historical loss payments and/or incurred losses divided by closed claims and/or total claims to calculate an estimated average cost per claim. From this, the expected ultimate average cost per claim can be estimated. The average severity method coupled with the claim count development method provides meaningful information regarding inflation and frequency trends that the Company believes is useful in establishing loss reserves. The claim count development method analyzes historical claim count development to estimate future
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incurred claim count development for current claims. The Company applies these development factors against current claim counts by accident period to calculate ultimate expected claim counts.

The Company analyzes catastrophe losses separately from non-catastrophe losses. The Company classifies certain losses as catastrophe losses based on catastrophe events designated by Property Claim Services, a unit of Insurance Services Office, Inc. For catastrophe losses, the Company generally determines claim counts based on claims reported and development expectations from previous catastrophes and applies an average expected loss per claim based on loss reserves established by adjusters and average losses on previous similar catastrophes.

For catastrophe losses that are considered “total losses” where the entire dwelling was destroyed, the Company primarily estimates losses based on the expected amounts to be paid out on the policy limits. Homeowners policies have multiple coverages, including dwelling, additional replacement costs, additional living expenses, and personal property, and on a typical total loss, many, but not all, of the various coverage limits are exhausted. It can take up to five years or longer for total loss claims to close, and the Company will reevaluate its total loss estimates periodically based on many factors, including estimated costs to rebuild if a decision was made to rebuild, actual rebuilding costs incurred, estimated time to rebuild, value of personal belongings destroyed, expected duration for the homeowner to be displaced, and demand surge.

In addition, subrogation may play an important role in the catastrophe loss estimate. For additional discussion on subrogation, see disclosures on the Palisades and Eaton wildfires in Note 12. Loss and Loss Adjustment Expense Reserves, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data."

There are many factors that can cause variability between the ultimate expected loss and the actual developed loss. While there are certainly other factors, the Company believes that the following four items tend to create the most variability between expected losses and actual losses.

(1) Inflation

For the Company’s California automobile lines of insurance business, total reserves excluding salvage and subrogation are comprised of the following:

•BI reserves—approximately 75% of total reserves

•Material damage ("MD") reserves, including collision and comprehensive property damage—approximately 5% of total reserves

•Loss adjustment expense reserves—approximately 20% of total reserves.

Loss development on MD reserves is generally insignificant because MD claims are generally settled in a shorter period than BI claims. The majority of the loss adjustment expense reserves are estimated costs to defend BI claims, which tend to require longer periods of time to settle as compared to MD claims.

BI loss reserves are generally the most difficult to estimate because they take longer to close than other coverages. BI coverage in the Company’s policies includes injuries sustained by any person other than the insured, except in the case of uninsured or underinsured motorist BI coverage, which covers damages to the insured for BI caused by uninsured or underinsured motorists. BI payments are primarily for medical costs and general damages.

The following table presents the typical cumulative closure patterns of BI claims in the Company's California personal automobile insurance coverage:
 % of Total
 Claims ClosedDollars Paid
BI claims closed in the accident year reported39%12%
BI claims closed one year after the accident year reported79%54%
BI claims closed two years after the accident year reported93%79%
BI claims closed three years after the accident year reported97%89%

BI claims closed in the accident year reported are generally the smaller and less complex claims that settle for approximately $11,000 to $12,000 on average, whereas the total average settlement, once all claims are closed for a particular
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accident year, is approximately $29,000 to $40,000. The Company creates incurred and paid loss triangles to estimate ultimate losses utilizing historical payment and reserving patterns and evaluates the results of this analysis against its frequency and severity analysis to establish BI loss reserves. The Company adjusts development factors to account for inflation trends it sees in loss severity. As a larger proportion of claims from an accident year are settled, there emerges a higher degree of certainty for the loss reserves established for that accident year. At December 31, 2025, the accident years that are most likely to develop are the 2023 through 2025 accident years; however, it is possible that older accident years could develop as well.

In 2022, excessive inflation led to significant increases in loss severities related to vehicle repairs and bodily injuries. The severe inflationary trend continued into 2023, but moderated as the year progressed. During 2024 and 2025, the inflation rate continued to be moderate for automobile parts and labor but it was at an elevated level for bodily injury costs. In general, the Company expects that historical claims trends will continue with costs tending to increase, which is generally consistent with historical data, and therefore the Company believes that it is reasonable to expect inflation to continue. Many potential factors can affect the BI inflation rate, including changes in claims handling process, changes in statutes and regulations, the number of litigated files, increased use of medical procedures such as MRIs and epidural injections, general economic factors, timeliness of claims adjudication, vehicle safety, weather patterns, changes in the relative percentages of single- and multi-car accidents, social inflation, and gasoline prices, among other factors; however, the magnitude of the impact of such factors on the inflation rate is unknown.

The Company believes that it is reasonably possible that the California automobile BI severity could vary from recorded amounts by as much as 12%, 8% and 6% for 2025, 2024 and 2023 accident years, respectively; however, the variation could be more or less than these amounts.

During the years 2021 through 2025, the changes in the loss severity amounts for the three preceding accident years from the prior year amounts (BI severity variance from prior year) have ranged as follows:
 HighLow
Immediate preceding accident year7.9%(1.6)%
Second preceding accident year5.4%(1.0)%
Third preceding accident year3.6%(2.6)%

The following table presents the effects on the California automobile BI loss reserves for the 2025, 2024 and 2023 accident years based on possible variations in the severity recorded; however, the actual variations could be more or less than these amounts:

California Automobile Bodily Injury Inflation Reserve Sensitivity Analysis
 
Accident
Year		Number of Claims Expected
Actual
Recorded
Severity at
12/31/2025
Implied
Inflation Rate
Recorded (1)
(A) Pro-forma
severity if actual
severity is lower by
12% for 2025,
8% for 2024, and
6% for 2023
(B) Pro-forma
severity if actual
severity is higher by
12% for 2025,
8% for 2024, and
6% for 2023
Favorable loss
development if
actual severity is
less than recorded
(Column A)		Unfavorable loss
development if
actual severity is
more than recorded
(Column B)
202521,556 $39,826 17.8 %$35,047 $44,605 $103,016,000 $(103,016,000)
202421,143 $33,813 14.6 %$31,108 $36,518 $57,192,000 $(57,192,000)
202321,308 $29,496 13.5 %$27,726 $31,266 $37,715,000 $(37,715,000)
202221,284 $25,987 — — — — — 
Total Loss Development—Favorable (Unfavorable) $197,923,000 $(197,923,000)
___________
(1)    Implied inflation rate is calculated by dividing the difference between the current and prior year actual recorded severity by the prior year actual recorded severity. The Company believes that severity increases are caused by litigation, medical costs, inflation, and increased utilization of medical procedures.

(2) Claim Count Development
The Company generally estimates ultimate claim counts for an accident period based on development of claim counts in prior accident periods. Typically, almost every claim is reported within one year following the end of an accident year and at that point the Company has a high degree of certainty as to the ultimate claim count. There are many factors that can affect the number of claims reported after an accident period ends. These factors include changes in weather patterns, a change in the number of litigated files, the number of automobiles insured, and whether the last day of the accident period falls on a weekday
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or a weekend. However, the Company is unable to determine which, if any, of the factors actually impact the number of claims reported and, if so, by what magnitude.

At December 31, 2025, there were 19,506 California automobile BI claims reported for the 2025 accident year and the Company estimates that these are expected to ultimately grow by approximately 10.5%. The Company believes that while actual development in recent years has ranged approximately from 3% to 12%, it is reasonable to expect that the range of the development could be as great as between 0% and 15%. However, actual development may be more or less than the expected range.

The following table presents the effects on loss development of different claim counts within the broader possible range at December 31, 2025:

California Automobile Bodily Injury Claim Count Reserve Sensitivity Analysis
2025 Accident Year
Claims Reported
Amount Recorded
at 12/31/2025 at  Approximately 10.5%
Claim Count
Development
Total Expected
Amount If Claim
Count Development is
0%
Total Expected
Amount If Claim
Count Development is
15%
Claim count19,506 21,556 19,506 22,432 
Approximate average cost per claimNot meaningful$39,826 $39,826 $39,826 
Total dollarsNot meaningful$858,489,000 $776,846,000 $893,377,000 
Total Loss Development—Favorable (Unfavorable)$81,643,000 $(34,888,000)

(3) Unexpected Losses

Unexpected losses are generally not provided for in the current loss reserve because they are not known or expected or differ materially from reasonable loss development expectations, and therefore they tend to be unquantifiable. Once known or otherwise quantifiable, the Company establishes a provision for the losses, but it is not possible to provide any meaningful sensitivity analysis as to the potential size of any unexpected losses. These losses can be caused by many factors, including unexpected legal interpretations of coverage, ineffective claims handling, regulations extending claims reporting periods, assumption of unexpected or unknown risks, adverse court decisions as well as many unknown factors.

Unexpected losses are fairly infrequent but can have a large impact on the Company’s losses. To mitigate this risk, the Company has established claims handling and review procedures. However, it is still possible that these procedures will not prove entirely effective, and the Company may have material unexpected losses in future periods. It is also possible that the Company has not identified and established a sufficient loss reserve for all material unexpected losses, even though a comprehensive claims file review was undertaken. The Company may experience additional development on these loss reserves.

(4) Palisades and Eaton Wildfires

The Palisades and Eaton wildfire losses and loss adjustment expenses (discussed in detail in Note 12. Loss and Loss Adjustment Expense Reserves, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data") have the potential to cause significant reserve variability primarily due to: 1) the large size of losses and loss adjustment expenses from those catastrophes totaling approximately $2.2 billion before subrogation and reinsurance; 2) the estimate for subrogation recoverable on the Eaton fire of approximately $538 million; and 3) changes in loss estimates provided by the FAIR Plan (the Company's share of the FAIR Plan losses from the Palisades and Eaton wildfires is recorded as part of the Company's losses and loss adjustment expenses from those catastrophes). The Company has made adjustments to the ultimate net losses and loss adjustment expenses from the Palisades and Eaton wildfires in each of the four quarters of 2025, based on updated information available at each measurement date. The total ultimate net losses and loss adjustment expenses recognized for the Palisades and Eaton wildfires were approximately $380.4 million, $381.0 million, $359.0 million, and $414.0 million at December 31, September 30, June 30, and March 31 of 2025, respectively.
Discussion of Losses and Loss Reserves and Prior Period Loss Development

At December 31, 2025 and 2024, the Company recorded its point estimate of approximately $3.63 billion and $3.15 billion ($3.60 billion and $3.12 billion, net of reinsurance), respectively, in loss and loss adjustment expense reserves, which included approximately $2.12 billion and $1.92 billion ($2.12 billion and $1.92 billion, net of reinsurance), respectively, of incurred-but-not-reported liabilities ("IBNR"). IBNR includes estimates, based upon past experience, of ultimate developed
39

costs, which may differ from case estimates, unreported claims that occurred on or prior to December 31, 2025 and 2024, and estimated future payments for reopened claims. Management believes that the liability for losses and loss adjustment expenses 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.

The Company evaluates its loss reserves quarterly. When management determines that the estimated ultimate claim cost requires a decrease for previously reported accident years, favorable development occurs and a reduction in losses and loss adjustment expenses is reported in the current period. If the estimated ultimate claim cost requires an increase for previously reported accident years, unfavorable development occurs and an increase in losses and loss adjustment expenses is reported in the current period. For 2025, the Company reported favorable development of approximately $92 million on the 2024 and prior accident years’ loss and loss adjustment expense reserves. The favorable development in 2025 was primarily attributable to lower than estimated losses and loss adjustment expenses in the automobile and homeowners lines of insurance business, including favorable development on the prior years' catastrophe losses.

The Company recorded catastrophe losses of approximately $508 million net of reinsurance in 2025. Catastrophe losses incurred in 2025 was reduced by approximately $586 million of subrogation recorded on the Palisades and Eaton wildfires. The majority of the 2025 catastrophe losses resulted from the Palisades and Eaton wildfires in California and severe storms in Texas, Oklahoma and California. In addition, the Company experienced favorable development of approximately $23 million on prior years' catastrophe losses in 2025.

RESULTS OF OPERATIONS
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024

Revenues

Net premiums earned and net premiums written in 2025 increased 8.5% and 6.4%, respectively, from 2024. The increases in net premiums earned and net premiums written were primarily due to rate increases in the California automobile and homeowners lines of insurance business combined with increases in the number of policies written in the California private passenger automobile and homeowners lines of insurance business, partially offset by increases in ceded premiums earned and ceded premiums written, respectively.

Net premiums earned included ceded premiums earned of $287.0 million and $136.7 million in 2025 and 2024, respectively. Net premiums written included ceded premiums written of $287.0 million and $138.0 million in 2025 and 2024, respectively. The increases in ceded premiums earned and ceded premiums written resulted mostly from reinstatement premiums earned and written of $101 million for use of reinsurance benefits associated with the Palisades and Eaton wildfires as well as higher reinsurance coverage and rates and growth in the covered book of business.

Net premiums earned, a GAAP measure, represents the portion of net premiums written that is recognized as revenue in the financial statements for the periods presented, earned on a pro-rata basis over the term of the policies. Net premiums written is a non-GAAP financial measure which represents the premiums charged on policies issued during a fiscal period less any applicable reinsurance. Net premiums written is a statutory measure designed to determine production levels.

The following is a reconciliation of total net premiums earned to net premiums written:
Year Ended December 31,
20252024
 (Amounts in thousands)
Net premiums earned$5,505,613 $5,075,456 
Change in net unearned premiums216,165 302,854 
Net premiums written$5,721,778 $5,378,310 

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Expenses

Loss and expense ratios are used to interpret the underwriting experience of property and casualty insurance companies. The following table presents the Insurance Companies’ loss, expense, and combined ratios determined in accordance with GAAP:
Year Ended December 31,
20252024
Loss ratio72.0 %72.6 %
Expense ratio24.3 %23.4 %
Combined ratio
96.3 %96.0 %
    
Loss ratio is calculated by dividing losses and loss adjustment expenses by net premiums earned. The Company’s loss ratio was affected by favorable development of approximately $92 million and unfavorable development of approximately $25 million on prior accident years’ loss and loss adjustment expense reserves for the years ended December 31, 2025 and 2024, respectively. The favorable development in 2025 was primarily attributable to lower than estimated losses and loss adjustment expenses in the automobile and homeowners lines of insurance business, including favorable development on the prior years' catastrophe losses. The unfavorable development in 2024 was primarily attributable to higher than estimated losses and loss adjustment expenses in the commercial automobile and commercial property lines of insurance business, partially offset by favorable reserve development in the private passenger automobile line of insurance business.

The 2025 loss ratio was negatively impacted by a total of approximately $531 million of catastrophe losses, excluding favorable development of approximately $23 million on prior years' catastrophe losses, primarily due to the Palisades and Eaton wildfires in California and severe storms in Texas, Oklahoma and California. Catastrophe losses incurred in 2025 was reduced by approximately $586 million of subrogation recorded on the Palisades and Eaton wildfires. For additional discussion on subrogation, see disclosures on the Palisades and Eaton wildfires in Note 12. Loss and Loss Adjustment Expense Reserves, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data." The 2024 loss ratio was negatively impacted by a total of approximately $268 million of catastrophe losses, excluding unfavorable development of approximately $9 million on prior years' catastrophe losses, primarily due to tornadoes, hailstorms and convective storms in Texas and Oklahoma, winter storms, rainstorms and wildfires in California, and the impact of Hurricane Helene in Florida and Georgia.

Excluding the effect of estimated prior accident years’ loss development and catastrophe losses, the loss ratio was 64.0% and 66.8% for the years ended December 31, 2025 and 2024, respectively. The decrease in the loss ratio was primarily due to rate increases in the California automobile and homeowners lines of insurance business and a decrease in loss frequency in the California private passenger automobile line of insurance business, partially offset by an increase in loss severity in the California private passenger automobile line of insurance business and an increase in ceded premiums earned due to reinstatement premiums resulting from the Palisades and Eaton wildfires.

Expense ratio is calculated by dividing the sum of policy acquisition costs and other operating expenses by net premiums earned. The expense ratio for 2025 increased compared to 2024, largely due to increases in expenses for profitability-related accruals and advertising, as well as an increase in ceded premiums earned due to reinstatement premiums resulting from the Palisades and Eaton wildfires, partially offset by the rate increases discussed above.

Combined ratio is equal to loss ratio plus expense ratio and is the key measure of underwriting performance traditionally used in the property and casualty insurance industry. A combined ratio under 100% generally reflects profitable underwriting results; a combined ratio over 100% generally reflects unprofitable underwriting results.

Income tax expense was $122.6 million and $106.9 million for the years ended December 31, 2025 and 2024, respectively. The increase in income tax expense was mainly due to an increase in pre-tax income.

The Company’s effective income tax rate can be affected by several factors. These generally include large changes in fully-taxable income including net realized investment gains or losses, tax-exempt investment income, nondeductible expenses, and periodically, non-routine tax items such as adjustments to unrecognized tax benefits related to tax uncertainties. Income tax expense of $122.6 million on pre-tax income of $663.6 million, including tax-exempt investment income of $99.2 million, resulted in an effective tax rate of 18.5%, below the statutory tax rate of 21%, for 2025, and income tax expense of $106.9 million on pre-tax income of $574.9 million, including tax-exempt investment income of $83.3 million, resulted in an effective tax rate of 18.6% for 2024.
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Investments
The following table presents the investment results of the Company:
Year Ended December 31,
20252024
 (Amounts in thousands)
Average invested assets at cost (1)
$5,968,575 $5,683,973 
Net investment income (2)(3)
Before income taxes$328,701 $279,989 
After income taxes$276,214 $235,419 
Average annual yield on investments (2)
Before income taxes4.7 %4.5 %
After income taxes4.0 %3.8 %
Net realized investment gains$131,368 $88,671 
__________ 
(1)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.
(2)Net investment income includes approximately $50.7 million and $25.5 million of interest income earned on cash (approximately $40.1 million and $20.2 million after tax) for the years ended December 31, 2025 and 2024, respectively. Average annual yield on investments does not include interest income earned on cash.
(3)Net investment income before and after income taxes increased, primarily due to higher average invested assets and cash combined with higher average yield. Average annual yield on investments before and after income taxes increased, primarily due to the maturity and replacement of lower yielding investments purchased when market interest rates were lower with higher yielding investments, combined with the higher average yield on investments purchased in 2025 using cash generated from operations compared to the average yield on overall investments in 2024.

The following tables present the components of net realized investment gains (losses) included in net income:
Year Ended December 31, 2025
Gains (Losses) Recognized in Net Income
 Sales
Changes in fair value
Total
 (Amounts in thousands)
Net realized investment gains (losses):
Fixed maturity securities (1)(2)(4)
$(17,105)$49,606 $32,501 
Equity securities (1)(3)(4)
90,792 221 91,013 
Short-term investments (1)
— (11)(11)
Note receivable (1)
— 182 182 
Options sold7,922 (239)7,683 
Total$81,609 $49,759 $131,368 

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Year Ended December 31, 2024
Gains (Losses) Recognized in Net Income
 Sales
Changes in fair value
Total
 (Amounts in thousands)
Net realized investment gains (losses):
Fixed maturity securities (1)(2)
$(2,745)$6,566 $3,821 
Equity securities (1)(3)
63,070 8,352 71,422 
Short-term investments (1)
(714)909 195 
Notes receivable (1)
— (162)(162)
Options sold12,781 614 13,395 
Total$72,392 $16,279 $88,671 
__________ 
(1)The changes in fair value of the investment portfolio and notes receivable resulted from the application of the fair value option.
(2)The increases in fair value of fixed maturity securities in 2025 and 2024 resulted primarily from decreases in certain market interest rates associated with the Company's fixed maturity securities.
(3)The increases in fair value of equity securities in 2025 and 2024 resulted primarily from the overall improvement in equity markets.
(4)The gains and losses on sales for the year ended December 31, 2025 primarily relate to the sale of low-yielding stocks and bonds in January 2025 to generate ample liquidity following the Palisades and Eaton wildfires.

Net Income (Loss)
 Year Ended December 31,
20252024
 (Amounts in thousands, except per share data)
Net income$541,094 $467,953 
Basic average shares outstanding55,389 55,373 
Diluted average shares outstanding55,389 55,377 
Basic Per Share Data:
Net income$9.77 $8.45 
Net realized investment gains, net of tax$1.87 $1.27 
Diluted Per Share Data:
Net income$9.77 $8.45 
Net realized investment gains, net of tax$1.87 $1.26 

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Company's Form 10-K for the year ended December 31, 2024 for a discussion of changes in its results of operations from the year ended December 31, 2023 to the year ended December 31, 2024.



LIQUIDITY AND CAPITAL RESOURCES
A. General
The Company is largely dependent upon dividends received from its insurance subsidiaries in the current and prior years to pay debt service costs and to make distributions to its shareholders. Under current insurance law, the Insurance Companies are entitled to pay ordinary dividends of approximately $448 million in 2026 to Mercury General. As of December 31, 2025, Mercury General had approximately $114 million in investments and cash that could be utilized to satisfy its direct holding company obligations.
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The principal sources of funds for the Insurance Companies are premiums, sales and maturity of invested assets, and dividend and interest income from invested assets. The principal uses of funds for the Insurance Companies are the payment of claims and related expenses, operating expenses, dividends to Mercury General, and the purchase of investments.

B. Cash Flows

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 $1,652.6 million at December 31, 2025 as well as $50 million of undrawn credit in its unsecured credit facility, the Company believes its cash flow from operations is adequate to satisfy its future liquidity requirements without the forced sale of investments. 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.

Net cash provided by operating activities for the year ended December 31, 2025 was $1,087.2 million, an increase of $50.1 million compared to the year ended December 31, 2024. The increase was primarily due to increases in reinsurance and subrogation recoveries, premium collections and investment income received, partially offset by increases in payments for losses and loss adjustment expenses and commissions and other acquisition costs. The Company utilized the cash provided by operating activities during the year ended December 31, 2025 primarily for the net purchases of investment securities and payment of dividends to its shareholders, with the remaining invested in cash accounts for future liquidity needs, including additional payment for losses from the Palisades and Eaton wildfires. The average annual net cash provided by operating activities for the past 10 years was approximately $557 million, and cash generated from operations was sufficient to meet the liquidity needs over this period.

The following table presents the estimated fair value of fixed maturity securities at December 31, 2025 by contractual maturity in the next five years.
 Fixed Maturity Securities
 (Amounts in thousands)
Due in one year or less$298,705 
Due after one year through two years215,514 
Due after two years through three years159,061 
Due after three years through four years237,111 
Due after four years through five years154,669 
$1,065,060 

See "D. Debt" below for cash flow related to outstanding debt.

C. Invested Assets
Portfolio Composition
An important component of the Company’s financial results is the return on its investment portfolio. The Company’s investment strategy emphasizes safety of principal and consistent income generation, within a total return framework. The investment strategy has historically focused on maximizing after-tax yield with a primary emphasis on maintaining a well-diversified, investment grade, fixed income portfolio to support the underlying liabilities and achieve return on capital and profitable growth. The Company believes that investment yield is maximized by selecting assets that perform favorably on a long-term basis and by disposing of certain assets to enhance after-tax yield and minimize the potential effect of downgrades and defaults. The Company believes that this strategy enables the optimal investment performance necessary to sustain investment income over time. The Company’s portfolio management approach utilizes a market risk and consistent asset allocation strategy as the primary basis for the allocation of interest sensitive, liquid and credit assets as well as for determining overall below investment grade exposure and diversification requirements. Within the ranges set by the asset allocation strategy, tactical investment decisions are made in consideration of prevailing market conditions.
44


The following table presents the composition of the total investment portfolio of the Company at December 31, 2025:
Cost(1)
Fair Value
 (Amounts in thousands)
Fixed maturity securities:
U.S. government bonds $21,436 $21,546 
Municipal securities3,533,295 3,538,473 
Mortgage-backed securities303,314 297,381 
Corporate securities747,723 751,602 
Collateralized loan obligations733,034 722,794 
Other asset-backed securities110,924 98,455 
5,449,726 5,430,251 
Equity securities:
Common stock557,738 679,594 
Non-redeemable preferred stock52,206 38,761 
Private equity funds measured at net asset value (2)
118,516 94,432 
728,460 812,787 
Short-term investments 336,978 336,992 
Total investments$6,515,164 $6,580,030 
 __________
(1)Fixed maturities and short-term bonds at amortized cost and equities and other short-term investments at cost.
(2)The fair value is measured using the net asset value practical expedient. See Note 4. Fair Value Measurements, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" for additional information.

At December 31, 2025, 43.6% of the Company’s total investment portfolio at fair value and 52.8% of its total fixed maturity investments at fair value were invested in tax-exempt state and municipal bonds. Equity holdings consist of non-redeemable preferred stocks, dividend-bearing common stocks on which dividend income is partially tax-sheltered by the 50% corporate dividend received deduction, and private equity funds. At December 31, 2025, 89.9% of short-term investments consisted of highly rated short-duration securities redeemable on a daily or weekly basis.
Fixed Maturity Securities and Short-Term Investments
Fixed maturity securities include debt securities, which may have fixed or variable principal payment schedules, may be held for indefinite periods of time, and may be used as a part of the Company’s asset/liability strategy or sold in response to changes in interest rates, anticipated prepayments, risk/reward characteristics, liquidity needs, tax planning considerations, or other economic factors. Short-term investments include money market accounts, options, and short-term bonds that are highly rated short duration securities and redeemable within one year.

A primary exposure for the fixed maturity securities is interest rate risk. The longer the duration, the more sensitive the asset is to market interest rate fluctuations. As assets with longer maturity dates tend to produce higher current yields, the Company’s historical investment philosophy has resulted in a portfolio with a moderate duration. The Company's portfolio is heavily weighted in investment grade tax-exempt municipal bonds. Fixed maturity securities purchased by the Company typically have call options attached, which further reduce the duration of the asset as interest rates decline. The holdings, that are heavily weighted with high coupon issues, are expected to be called prior to maturity. Modified duration measures the length of time it takes, on average, to receive the present value of all the cash flows produced by a bond, including reinvestment of interest. As it measures four factors (maturity, coupon rate, yield and call terms) which determine sensitivity to changes in interest rates, modified duration is considered a better indicator of price volatility than simple maturity alone.
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The following table presents the maturities and durations of the Company's fixed maturity securities:
December 31, 2025December 31, 2024
(in years)
Fixed Maturity Securities
Nominal average maturity:
excluding short-term investments14.711.7
including short-term investments13.811.1
Call-adjusted average maturities:
excluding short-term investments4.84.2
including short-term investments4.54.0
Modified duration reflecting anticipated early calls:
excluding short-term investments4.63.6
including short-term investments4.43.4

Another exposure related to the fixed maturity securities is credit risk, which is managed by maintaining a weighted-average portfolio credit quality rating of A+, at fair value at December 31, 2025, consistent with the average rating at December 31, 2024. The Company’s municipal bond holdings, of which 81.1% were tax exempt, represented 65.2% of its fixed maturity portfolio at December 31, 2025, at fair value, and were broadly diversified geographically.

To calculate the weighted-average credit quality ratings as disclosed throughout this Annual Report on Form 10-K, individual securities were weighted based on fair value and a credit quality numeric score that was assigned to each security’s average of ratings assigned by nationally recognized securities rating organizations.

Taxable holdings consist principally of investment grade issues. At December 31, 2025, fixed maturity 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. The majority of non-rated issues are a result of municipalities pre-funding and collateralizing those issues with U.S. government securities with an implicit AAA equivalent credit risk. At December 31, 2024, fixed maturity holdings rated below investment grade and non-rated bonds totaled $6.2 million and $62.3 million, respectively, at fair value, and represented 0.1% and 1.3%, respectively, of total fixed maturity securities.

During 2025, approximately 92.3% of the Company's fixed maturity securities at fair value experienced no changes in their overall credit ratings, and approximately 5.9% and 1.8% experienced upgrades and downgrades, respectively.























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The following table presents the credit quality ratings of the Company’s fixed maturity securities by security type at fair value:
 December 31, 2025
Security Type
AAA(1)
AA(1)
A(1)
BBB(1)
Non-Rated/Other (1)
Total Fair Value(1)
 (Dollars in thousands)
U.S. government bonds:
Treasuries$21,546 $— $— $— $— $21,546 
Total21,546 — — — — 21,546 
100.0 %— %— %— %— %100.0 %
Municipal securities:
Insured57,310 267,446 96,453 34,588 1,001 456,798 
Uninsured192,656 1,418,858 1,332,526 126,798 10,837 3,081,675 
Total249,966 1,686,304 1,428,979 161,386 11,838 3,538,473 
7.1 %47.6 %40.4 %4.6 %0.3 %100.0 %
Mortgage-backed securities:
Commercial10,959 — — 220 — 11,179 
Agencies— 69,089 — — — 69,089 
Non-agencies:
Prime102,479 113,396 — — 277 216,152 
Alt-A— 386 85 — 490 961 
       Total113,438 182,871 85 220 767 297,381 
38.1 %61.5 %— %0.1 %0.3 %100.0 %
Corporate securities:
Basic Materials— — — 4,557 — 4,557 
Communications— — — 3,773 — 3,773 
Consumer, cyclical— 1,994 30,040 17,197 — 49,231 
Consumer, non-cyclical— 15,156 78,970 8,176 — 102,302 
Energy— 6,481 — 43,040 — 49,521 
Financial— 70,960 365,111 32,897 9,525 478,493 
Industrial— 15,000 10,829 16,842 — 42,671 
Technology— — 1,797 — — 1,797 
Utilities— — 3,251 16,006 — 19,257 
Total— 109,591 489,998 142,488 9,525 751,602 
— %14.6 %65.1 %19.0 %1.3 %100.0 %
Collateralized loan obligations:
Corporate158,344 166,551 359,304 — 38,595 722,794 
Total158,344 166,551 359,304 — 38,595 722,794 
21.9 %23.0 %49.8 %— %5.3 %100.0 %
Other asset-backed securities— 2,329 64,009 32,117 — 98,455 
— %2.4 %65.0 %32.6 %— %100.0 %
Total$543,294 $2,147,646 $2,342,375 $336,211 $60,725 $5,430,251 
10.0 %39.5 %43.2 %6.2 %1.1 %100.0 %
__________
(1)Intermediate ratings are included at each level (e.g., AA includes AA+, AA and AA-).

U.S. Government Bonds
The Company had $21.5 million and $93.8 million, or 0.4% and 1.9% of its fixed maturity portfolio, at fair value, in U.S. government bonds at December 31, 2025 and 2024, respectively. Moody's and Fitch ratings for U.S. government-issued debt
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were Aa1 and AA+, respectively, at December 31, 2025, and Aaa and AA+, respectively, at December 31, 2024. The Company understands that market participants continue to use rates of return on U.S. government debt as a risk-free rate and have continued to invest in U.S. Treasury securities. The modified duration of the U.S. government bonds portfolio reflecting anticipated early calls was 2.9 years and 1.3 years at December 31, 2025 and 2024, respectively.
Municipal Securities
The Company had $3.54 billion and $2.99 billion, or 65.2% and 60.8% of its fixed maturity securities portfolio, at fair value, in municipal securities at December 31, 2025 and 2024, respectively. At December 31, 2025 and December 31, 2024, the weighted-average rating of the Company’s total municipal securities was AA- and A+, respectively. 18.9% and 26.0% of the Company's municipal securities, at fair value, were subject to federal taxes at December 31, 2025 and 2024, respectively. The modified duration of the municipal securities portfolio reflecting anticipated early calls was 4.9 years and 3.6 years at December 31, 2025 and 2024, respectively.

At December 31, 2025 and 2024, respectively, $456.8 million and $492.7 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.
Mortgage-Backed Securities
At December 31, 2025 and 2024, respectively, the mortgage-backed securities portfolio of $297.4 million and $259.4 million, or 5.5% and 5.3% of the Company's fixed maturity securities portfolio, at fair value, was categorized as loans to "prime" residential and commercial real estate borrowers. The Company had holdings of $11.2 million and $16.0 million, at fair value, in commercial mortgage-backed securities at December 31, 2025 and 2024, respectively.

The weighted-average rating of the entire mortgage backed securities portfolio was AA+ at December 31, 2025 and 2024. The modified duration of the mortgage-backed securities portfolio reflecting anticipated early calls was 3.4 years and 4.9 years at December 31, 2025 and 2024, respectively.
Corporate Securities
At December 31, 2025 and 2024, respectively, the company had corporate securities of $751.6 million and $841.7 million, or 13.8% and 17.1% of its fixed maturity securities portfolio, at fair value. The weighted-average rating was A at December 31, 2025 and 2024. The modified duration reflecting anticipated early calls was 2.9 years and 3.0 years at December 31, 2025 and 2024, respectively.
Collateralized Loan Obligations
At December 31, 2025 and 2024, respectively, the Company had collateralized loan obligations of $722.8 million and $626.3 million, or 13.3% and 12.7% of its fixed maturity securities portfolio, at fair value. The weighted-average rating was AA- at December 31, 2025 and 2024. The modified duration reflecting anticipated early calls was 5.9 years and 4.9 years at December 31, 2025 and 2024, respectively.

Other Asset-Backed Securities

The Company had other asset-backed securities of $98.5 million and $105.1 million, which represented 1.8% and 2.1% of its fixed maturity securities portfolio, at fair value, at December 31, 2025 and 2024, respectively. The weighted-average rating was A- at December 31, 2025 and 2024. The modified duration reflecting anticipated early calls was 0.9 years and 1.4 years at December 31, 2025 and 2024, respectively.

Equity Securities
Equity holdings of $812.8 million and $879.2 million, at fair value, as of December 31, 2025 and 2024, respectively, consisted of non-redeemable preferred stocks, common stocks on which dividend income is partially tax-sheltered by the 50% corporate dividend received deduction, and private equity funds. The net gains due to changes in fair value of the Company’s
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equity portfolio were $0.2 million and $8.4 million in 2025 and 2024, respectively. The primary cause for the increases in fair value of the Company's equity securities in 2025 and 2024 was the overall improvement in equity markets.
The Company’s common stock allocation is intended to enhance the return of and provide diversification for the total portfolio. At December 31, 2025, 12.4% of the total investment portfolio, at fair value, was held in equity securities, compared to 14.5% at December 31, 2024.

The following table presents the equity security portfolio by industry sector at December 31, 2025 and 2024:
 December 31,
 20252024
 CostFair ValueCostFair Value
  (Amounts in thousands) 
Equity securities:
Basic materials$33,994 $39,963 $37,257 $28,814 
Communications30,043 29,712 39,463 43,801 
Consumer, cyclical12,940 19,744 36,810 41,510 
Consumer, non-cyclical42,133 58,242 62,377 71,520 
Energy47,756 53,170 114,379 120,619 
Financial101,345 95,420 100,075 97,470 
Funds149,085 140,318 133,934 128,541 
Industrial49,975 76,526 49,442 75,748 
Technology80,094 113,892 103,828 147,102 
Utilities181,095 185,800 117,503 124,050 
$728,460 $812,787 $795,068 $879,175 

D. Debt
The Company's debt consists of the following:
December 31,
LenderInterest RateExpiration20252024
(Amounts in thousands)
Senior unsecured notes(1)
Publicly traded4.40%March 15, 2027$375,000 $375,000 
Unsecured credit facility(2)
Bank of America, Wells Fargo Bank, BMO Bank, and U.S. Bank
Term SOFR plus 112.5-150.0 basis points
November 18, 2027200,000 200,000 
    Total principal amount575,000 575,000 
Less unamortized discount and debt issuance costs(3)
473 872 
Total$574,527 $574,128 
__________
(1)    On March 8, 2017, the Company completed a public debt offering issuing $375 million of senior notes. The notes are unsecured senior obligations of the Company, with a 4.4% annual coupon payable on March 15 and September 15 of each year commencing September 15, 2017. These notes mature on March 15, 2027. The Company used the proceeds from the notes to pay off amounts outstanding under the existing loan and credit facilities and for general corporate purposes. The Company incurred debt issuance costs of approximately $3.4 million, inclusive of underwriters' fees. The notes were issued at a slight discount of 99.847% of par, resulting in the effective annualized interest rate, including debt issuance costs, of approximately 4.45%.
(2)    On March 31, 2021, the Company entered into an unsecured $75 million five-year revolving credit facility. On November 18, 2022, the Company entered into the First Amendment to this credit facility. The First Amendment extended the maturity date of the loan to November 16, 2026 from March 31, 2026 with possible further extension if certain conditions are met, increased the aggregate commitments by all the lenders to $200 million from $75 million, and replaced the LIBOR with the term SOFR. On November 30, 2023, the Company entered into the Second Amendment to this credit facility, which further increased the aggregate commitments by all the lenders to $250 million from $200 million. On November 22, 2024, the Company entered into the Third Amendment to this credit facility, which extended and fixed the maturity
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date of the loan to November 18, 2027. The interest rates on borrowings under the credit facility are based on the Company's debt to total capital ratio and range from Term SOFR plus 112.5 basis points when the ratio is under 20% to Term SOFR plus 150.0 basis points when the ratio is greater than or equal to 30%. Commitment fees for the undrawn portions of the credit facility range from 12.5 basis points when the ratio is under 20% to 22.5 basis points when the ratio is greater than or equal to 30%. The debt to total capital ratio is expressed as a percentage of (a) consolidated debt to (b) consolidated shareholders' equity plus consolidated debt. The Company's debt to total capital ratio was 19.2% at December 31, 2025, resulting in a 12.5 basis point commitment fee on any undrawn portion of the credit facility. As of February 17, 2026, a total of $200 million was drawn under this facility on a three-month revolving basis at an annual interest rate of approximately 5.09%, with $50 million available to be drawn. The Company contributed $150 million of the total amount drawn to the surplus of its consolidated insurance subsidiaries in 2023, and used the remainder for general corporate purposes.
(3)    The unamortized discount and debt issuance costs are associated with the publicly traded $375 million senior unsecured notes. These are amortized to interest expense over the life of the notes, and the unamortized balance is presented in the Company's consolidated balance sheets as a direct deduction from the carrying amount of the debt. The unamortized debt issuance cost of approximately $0.4 million associated with the $250 million unsecured revolving credit facility maturing on November 18, 2027 is included in other assets in the Company's consolidated balance sheets and amortized to interest expense over the term of the credit facility.

The Company was in compliance with all of its financial covenants pertaining to minimum statutory surplus, debt to total capital ratio, and RBC ratio under the unsecured credit facility at December 31, 2025.

For a further discussion, see Note 8. Notes Payable, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data."
E. Uses of Capital
Dividends

Cash returned to shareholders through dividends was approximately $70.3 million in each of 2025, 2024 and 2023. On February 13, 2026, the Board of Directors declared a $0.3175 quarterly dividend per share payable on March 26, 2026 to shareholders of record on March 12, 2026, with an expected payout of approximately $18 million. The Company currently expects quarterly dividends to continue in future periods, although the declaration and amount of any future cash dividends are at the discretion and subject to the approval of its Board of Directors. The decisions of the Company's Board of Directors regarding the amount and payment of dividends will depend on many factors, such as its financial condition, results of operations, capital requirements, business conditions, debt service obligations, industry practice, legal requirements, regulatory constraints, and other factors that its Board of Directors may deem relevant. The Company expects to fund its future dividend payments primarily with a combination of cash expected to be generated from future operations and cash and short-term investments on hand.

For a further discussion, see Note 13. Dividends, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data."
Capital Expenditures

The Company's capital expenditures were approximately $58.4 million, $46.1 million and $36.8 million for 2025, 2024 and 2023, respectively, and they were primarily related to improving the Company's information technology infrastructure. The Company expects the capital spending for 2026, primarily for continued investments in its technology assets, to be somewhat larger than that for 2025. The Company expects to fund its 2026 capital expenditures primarily with a combination of cash expected to be generated from future operations and cash and short-term investments on hand.









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Contractual Obligations

The Company’s material cash requirements include the following contractual obligations at December 31, 2025:
Contractual Obligations Payments Due By Period
Total20262027202820292030Thereafter
   (Amounts in thousands)  
Debt (including interest)(1)
$619,007 $26,680 $592,327 $— $— $— $— 
Lease obligations(2)
22,880 8,356 5,826 4,144 2,570 548 1,436 
Loss and loss adjustment expense reserves(3)
3,633,338 2,026,083 741,296 334,367 211,019 113,727 206,846 
Total contractual obligations$4,275,225 $2,061,119 $1,339,449 $338,511 $213,589 $114,275 $208,282 
__________ 
(1)The Company’s debt contains various terms, conditions and covenants which, if violated by the Company, would result in a default and could result in the acceleration of the Company’s payment obligations. Amounts differ from the balances presented on the consolidated balance sheet as of December 31, 2025 because the debt amounts above include interest and exclude the discount and issuance costs of the debt.
(2)The Company is obligated under various non-cancellable lease agreements providing for office space, automobiles, office equipment, and electronic data processing equipment that expire at various dates through the year 2036. Lease obligations include $8.1 million in lease commitments that have not yet commenced as of December 31, 2025. See Note 7. Leases, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" for additional information on lease obligations.
(3)Loss and loss adjustment expense reserves represents an estimate of amounts necessary to settle all outstanding claims, including IBNR as of December 31, 2025. The Company has estimated the timing of these payments based on its historical experience and expectation of future payment patterns. However, the timing of these payments may vary significantly from the amounts shown above. The ultimate cost of losses may vary materially from recorded amounts which are the Company’s best estimates. For more detailed information on the Company's historical loss experience and payment patterns, see "Overview—C. Critical Accounting Estimates" in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," as well as Note 12. Loss and Loss Adjustment Expense Reserves, of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data."

The Company expects to meet these contractual obligations primarily with a combination of cash expected to be generated from future operations and cash and short-term investments on hand, except for the payment of the principal of the debt, which is expected to be made with a future borrowing.
F. Regulatory Capital Requirements
The Insurance Companies must comply with minimum capital requirements under applicable state laws and regulations. The RBC formula is used by insurance regulators to monitor capital and surplus levels. It was designed to capture the widely varying elements of risks undertaken by writers of different lines of insurance business having differing risk characteristics, as well as writers of similar lines where differences in risk may be related to corporate structure, investment policies, reinsurance arrangements, and a number of other factors. The Company periodically monitors the RBC level of each of the Insurance Companies. As of December 31, 2025, 2024 and 2023, each of the Insurance Companies exceeded the minimum required RBC level, as determined by the NAIC and adopted by the state insurance regulators. None of the Insurance Companies’ RBC ratios were less than 350% of the authorized control level RBC as of December 31, 2025, 2024 and 2023. Generally, an RBC ratio of 200% or less would require some form of regulatory or company action.

Among other considerations, industry and regulatory guidelines suggest that the ratio of a property and casualty insurer’s annual net premiums written to statutory policyholders’ surplus should not exceed 3.0 to 1. Based on the combined surplus of all the Insurance Companies of $2.39 billion at December 31, 2025 and net premiums written in 2025 of $5.7 billion, the ratio of premiums written to surplus was 2.39 to 1.

Insurance companies are required to file an Own Risk and Solvency Assessment ("ORSA") with the insurance regulators in their domiciliary states. The ORSA is required to cover, among many items, a company’s risk management policies, the material risks to which the company is exposed, how the company measures, monitors, manages and mitigates material risks, and how much economic and regulatory capital is needed to continue to operate in a strong and healthy manner. The ORSA is intended to be used by state insurance regulators to evaluate the risk exposure and quality of the risk management processes
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within insurance companies to assist in conducting risk-focused financial examinations and for determining the overall financial condition of insurance companies. The Company filed its most recent ORSA Summary Report with the California DOI in November 2025. Compliance with the ORSA requirements did not have a material impact on the Company's consolidated financial statements.

The DOI in each state in which the Company operates is responsible for conducting periodic financial and market conduct examinations of the Insurance Companies in their states. Market conduct examinations typically review compliance with insurance statutes and regulations with respect to rating, underwriting, claims handling, billing, and other practices.

The following table presents a summary of recent examinations:
StateExam TypePeriod Under ReviewStatus
TXMarket Conduct2022Final examination reports were issued in the first half of 2025.

During the course of and at the conclusion of the examinations, the examining DOI generally reports findings to the Company. No material findings have been communicated to the Company in the Texas market conduct examination reports noted above.
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Item 7A. Quantitative and Qualitative Disclosures about Market Risks
The Company is subject to various market risk exposures primarily due to its investing and borrowing activities. Primary market risk exposures are changes in interest rates, equity prices, and credit risk. Adverse changes to these rates and prices may occur due to changes in the liquidity of a market, or to changes in market perceptions of creditworthiness and risk tolerance. The following disclosure reflects estimates of future performance and economic conditions. Actual results may differ.
Overview
The Company’s investment policies define the overall framework for managing market and investment risks, including accountability and controls over risk management activities, and specify the investment limits and strategies that are appropriate given the liquidity, surplus, product profile, and regulatory requirements of the Company's subsidiaries. Executive oversight of investment activities is conducted primarily through the Company’s investment committee. The Company’s investment committee focuses on strategies to enhance after-tax yields, mitigate market risks, and optimize capital to improve profitability and returns.

The Company manages exposures to market risk through the use of asset allocation, duration, and credit ratings. Asset allocation limits place restrictions on the total amount of funds that may be invested within an asset class. Duration limits on the fixed maturity securities portfolio place restrictions on the amount of interest rate risk that may be taken. Comprehensive day-to-day management of market risk within defined tolerance ranges occurs as portfolio managers buy and sell within their respective markets based upon the acceptable boundaries established by investment policies.

Credit Risk
Credit risk results from uncertainty in a counterparty’s ability to meet its obligations. Credit risk is managed by maintaining a high credit quality fixed maturity securities portfolio. As of December 31, 2025, the estimated weighted-average credit quality rating of the fixed maturity securities portfolio was A+, at fair value, consistent with the average rating at December 31, 2024.
The following table presents municipal securities by state in descending order of holdings at fair value at December 31, 2025:
StatesFair ValueAverage Rating
(Amounts in thousands)
Florida$395,322 A+
California337,542 AA-
Texas326,942 AA
New York271,853 AA
Pennsylvania242,251 A+
Other states1,964,563 AA-
Total$3,538,473 

At December 31, 2025, the municipal securities portfolio was broadly diversified among the states and the largest holdings were in populous states such as Florida and California. These holdings were further diversified primarily among cities, counties, schools, public works, hospitals, and state general obligations. The Company seeks to minimize overall credit risk and ensure diversification by limiting exposure to any particular issuer.
Taxable fixed maturity securities represented 47.2% of the Company’s fixed maturity portfolio at December 31, 2025. 0.01% of the Company’s taxable fixed maturity securities, representing 0.01% of its total fixed maturity portfolio, were rated below investment grade at December 31, 2025. Below investment grade issues are considered "watch list" items by the Company, and their status is evaluated within the context of the Company’s overall portfolio and its investment policy on an aggregate risk management basis, as well as their ability to recover their investment on an individual issue basis.
Equity Price Risk
Equity price risk is the risk that the Company will incur losses due to adverse changes in the equity markets.
At December 31, 2025, the Company’s primary objective for common equity investments was current income. The fair value of the equity investments consisted of $679.6 million in common stocks, $38.8 million in non-redeemable preferred stocks, and $94.4 million in private equity funds. Common stocks are typically valued for future economic prospects as
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perceived by the market.
Common stocks represented 10.3% of total investments at fair value at December 31, 2025. Beta is a measure of a security’s systematic (non-diversifiable) risk, which is measured as the percentage change in an individual security’s return for a 1% change in the return of the market.
Based on hypothetical reductions in the overall value of the stock market, the following table illustrates estimated reductions in the overall value of the Company’s common stock portfolio at December 31, 2025 and 2024:
December 31,
20252024
(Amounts in thousands, except Average Beta)
Average Beta0.84 0.90 
Hypothetical reduction of 25% in the overall value of the stock market $142,205 $166,252 
Hypothetical reduction of 50% in the overall value of the stock market $284,410 $332,504 

Interest Rate Risk
Interest rate risk is the risk that the Company will incur a loss due to adverse changes in interest rates relative to the interest rate characteristics of interest bearing assets and liabilities. The Company faces interest rate risk, as it invests a substantial amount of funds in interest sensitive assets and issues interest sensitive liabilities. Interest rate risk includes risks related to changes in U.S. Treasury yields and other key benchmarks, as well as changes in interest rates resulting from widening credit spreads and credit exposure to collateralized securities.
The fixed maturity portfolio at December 31, 2025, which represented 82.5% of total investments at December 31, 2025, at fair value, is subject to interest rate risk. As market interest rates decrease, the value of the portfolio increases and vice versa. A common measure of the interest sensitivity of fixed maturity assets is modified duration, a calculation that utilizes maturity, coupon rate, yield and call terms to calculate an average age to receive the present value of all the cash flows produced by such assets, including reinvestment of interest. The longer the duration, the more sensitive the asset is to market interest rate fluctuations.
The Company has historically invested in fixed maturity securities with a goal of maximizing after-tax yields and holding assets to the maturity or call date. Since assets with longer maturities tend to produce higher current yields, the Company’s historical investment philosophy resulted in a portfolio with a moderate duration. Fixed maturity securities purchased by the Company typically have call options attached, which further reduce the duration of the asset as interest rates decline. The modified duration of the overall fixed maturity securities portfolio reflecting anticipated early calls was 4.4 years at December 31, 2025. 
If interest rates were to rise by 100 and 200 basis points, the Company estimates that the fair value of its fixed maturity securities portfolio at December 31, 2025 would decrease by $251.0 million and $502.1 million, respectively. Conversely, if interest rates were to decrease, the fair value of the Company’s fixed maturity securities portfolio would rise, and it may cause a higher number of the Company’s fixed maturity securities to be called away. The proceeds from the called fixed maturity securities would likely be reinvested at lower yields, which would result in lower overall investment income for the Company.

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Item 8.Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
 Page
Reports of Independent Registered Public Accounting Firm (KPMG LLP, Los Angeles, CA, Auditor Firm ID: 185)
Consolidated Financial Statements:
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors
Mercury General Corporation:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Mercury General Corporation and subsidiaries (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2025, and the related notes and financial statement schedules I, II, and IV (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 17, 2026 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Loss and loss adjustment expense reserves
As discussed in Notes 1 and 12 to the consolidated financial statements, the Company estimates loss and loss adjustment expense reserves (loss reserves) to cover incurred losses and loss adjustment expenses. Specifically, loss reserves are established based on the Company’s assessment of claims pending and the development of prior years’ loss liabilities. As of December 31, 2025, the loss and loss adjustment expense reserve balance was $3.63 billion, which included catastrophe losses.

We identified the evaluation of loss reserves, excluding catastrophe losses, as a critical audit matter. Subjective auditor judgment was required to assess the Company’s selected methods and assumptions, such as paid and incurred loss development factors, used to estimate loss reserves. Specialized actuarial skills and knowledge were needed to evaluate the Company’s actuarial methodologies and the estimate of future claims payment and reporting patterns based on observed historical patterns.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s reserving process. This
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included controls related to the selection of methods and assumptions used in the estimate of loss reserves. We also involved actuarial professionals with specialized skills and knowledge, who assisted in:

• assessing the Company’s methodology for estimating loss reserves by comparing it to generally accepted actuarial methods

• evaluating the Company’s estimates for certain lines of business by performing independent analyses of loss reserves using the Company’s underlying historical claims data

• developing a range of reserves for certain lines of business based on actuarial methodologies and comparing to the Company’s recorded loss reserves for those lines of business

• evaluating the year-over-year movements of the Company’s recorded loss reserves within the developed range of reserves.


/s/    KPMG LLP

We have served as the Company’s auditor since 1963.
Los Angeles, California
February 17, 2026
57

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors
Mercury General Corporation:
Opinion on Internal Control Over Financial Reporting
We have audited Mercury General Corporation and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2025, and the related notes and financial statement schedules I, II and IV (collectively, the consolidated financial statements), and our report dated February 17, 2026 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/    KPMG LLP
Los Angeles, California
February 17, 2026
58

MERCURY GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands) 
 December 31,
 20252024
ASSETS
Investments, at fair value:
Fixed maturity securities (amortized cost $5,449,726; $4,982,459)
$5,430,251 $4,913,378 
Equity securities (cost $728,460; $795,068)
812,787 879,175 
Short-term investments (cost $336,978; $283,792)
336,992 283,817 
Total investments6,580,030 6,076,370 
Cash1,315,574 720,257 
Receivables:
Premiums751,554 697,176 
      Allowance for credit losses on premiums receivable(6,000)(6,400)
                   Premiums receivable, net of allowance for credit losses745,554 690,776 
Accrued investment income73,004 67,630 
Other86,508 62,118 
Total receivables905,066 820,524 
Reinsurance recoverables (net of allowance for credit losses $39; $0)
109,672 28,613 
Deferred policy acquisition costs359,724 335,332 
Fixed assets, net146,880 138,177 
Operating lease right-of-use assets12,125 13,407 
Deferred income taxes30,637 45,854 
Goodwill42,796 42,796 
Other intangible assets, net6,827 7,682 
Other assets51,338 81,620 
Total assets$9,560,669 $8,310,632 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Loss and loss adjustment expense reserves$3,633,338 $3,152,031 
Unearned premiums2,255,935 2,039,830 
Notes payable574,527 574,128 
Accounts payable and accrued expenses448,703 417,765 
Operating lease liabilities12,328 13,580 
Current income taxes30,770 20,752 
Other liabilities187,793 146,022 
Total liabilities7,143,394 6,364,108 
Commitments and contingencies
Shareholders’ equity:
Common stock without par value or stated value:
Authorized 70,000 shares; issued and outstanding 55,389; 55,389
99,699 99,699 
Retained earnings2,317,576 1,846,825 
Total shareholders’ equity2,417,275 1,946,524 
Total liabilities and shareholders’ equity$9,560,669 $8,310,632 

See accompanying Notes to Consolidated Financial Statements.


59

MERCURY GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
 Year Ended December 31,
 202520242023
Revenues:
Net premiums earned$5,505,613 $5,075,456 $4,274,378 
Net investment income328,701 279,989 234,630 
Net realized investment gains131,368 88,671 101,014 
Other26,786 31,517 19,609 
Total revenues5,992,468 5,475,633 4,629,631 
Expenses:
Losses and loss adjustment expenses3,963,031 3,684,511 3,517,853 
Policy acquisition costs942,939 858,261 708,525 
Other operating expenses394,226 327,157 279,656 
Interest28,623 30,824 24,169 
Total expenses5,328,819 4,900,753 4,530,203 
Income before income taxes663,649 574,880 99,428 
Income tax expense
122,555 106,927 3,092 
Net income$541,094 $467,953 $96,336 
Net income per share:
Basic$9.77 $8.45 $1.74 
Diluted$9.77 $8.45 $1.74 


See accompanying Notes to Consolidated Financial Statements.


60

MERCURY GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)
 Year Ended December 31,
 202520242023
Common stock, beginning of year$99,699 $98,947 $98,947 
Proceeds from stock options exercised— 752 — 
Common stock, end of year99,699 99,699 98,947 
Retained earnings, beginning of year1,846,825 1,449,198 1,423,184 
Net income541,094 467,953 96,336 
Dividends paid to shareholders(70,343)(70,326)(70,322)
Retained earnings, end of year2,317,576 1,846,825 1,449,198 
Total shareholders’ equity, end of year$2,417,275 $1,946,524 $1,548,145 


See accompanying Notes to Consolidated Financial Statements.


61

MERCURY GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 Year Ended December 31,
 202520242023
CASH FLOWS FROM OPERATING ACTIVITIES
Net income$541,094 $467,953 $96,336 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization74,989 73,433 72,240 
Net realized investment gains(131,368)(88,671)(101,014)
Net gains on sales of fixed assets (2,690)(20,111)(5,879)
Loss on property held for sale— 6,420 — 
Increase in premiums receivable(54,778)(89,051)(35,615)
(Increase) decrease in reinsurance recoverables(81,059)3,334 (6,052)
Changes in current and deferred income taxes25,236 11,992 60,945 
Increase in deferred policy acquisition costs(24,392)(41,488)(27,369)
Increase in loss and loss adjustment expense reserves481,307 366,329 200,792 
Increase in unearned premiums216,105 304,170 190,021 
Increase in accounts payable and accrued expenses32,747 69,616 29,908 
Other, net9,997 (26,809)(21,309)
      Net cash provided by operating activities1,087,188 1,037,117 453,004 
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed maturity securities available for sale in nature:
Purchases(1,843,241)(1,720,986)(784,752)
Sales458,246 171,432 276,805 
Calls or maturities876,688 940,858 294,309 
Equity securities available for sale in nature:
Purchases(1,926,502)(1,663,525)(1,356,493)
Sales2,083,902 1,550,229 1,356,132 
Calls— 7,185 — 
Changes in securities payable and receivable470 32,327 (36,435)
Increase in short-term investments (53,166)(92,156)(48,446)
Purchases of fixed assets(58,431)(46,138)(36,810)
Sales of fixed assets34,153 12,707 29,860 
Other, net 7,725 11,411 10,377 
Net cash used in investing activities(420,156)(796,656)(295,453)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid to shareholders(70,343)(70,326)(70,322)
Proceeds from stock options exercised— 752 — 
Payments on finance lease obligations(1,372)(1,533)(1,102)
Proceeds from bank loan— — 175,000 
Net cash (used in) provided by financing activities(71,715)(71,107)103,576 
Net increase in cash595,317 169,354 261,127 
Cash:
Beginning of year720,257 550,903 289,776 
End of year$1,315,574 $720,257 $550,903 
SUPPLEMENTAL CASH FLOW DISCLOSURE
Interest paid$28,161 $30,077 $23,000 
Income taxes paid (refunded), net
U.S. federal$96,614 $91,004 $(57,839)
U.S. state and local
    California332 3,654 54 
    Other357 273 (68)
689 3,927 (14)
Foreign17 4 — 
             Total income taxes paid (refunded), net$97,320 $94,935 $(57,853)

See accompanying Notes to Consolidated Financial Statements.


62

MERCURY GENERAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
General
Mercury General Corporation ("Mercury General") and its subsidiaries (referred to herein collectively as the "Company") are primarily engaged in writing personal automobile insurance through 12 Insurance Companies in 11 states, principally California. The Company also writes homeowners, commercial automobile, commercial property, mechanical protection, fire, and umbrella insurance. The private passenger automobile line of insurance business accounted for more than 60% of the Company’s direct premiums written in 2025, 2024, and 2023, and approximately 86%, 84%, and 82% of the private passenger automobile premiums were written in California in 2025, 2024, and 2023, respectively. Premiums written represents the premiums charged on policies issued during a fiscal period, which is a statutory measure designed to determine production levels.
Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of Mercury General Corporation and its subsidiaries:
Insurance Companies 
Mercury Casualty Company ("MCC")American Mercury Insurance Company
Mercury Insurance Company ("MIC") 
Mercury Insurance Company of Texas(1)
California Automobile Insurance Company ("CAIC") 
Mercury County Mutual Insurance Company(2)
California General Underwriters Insurance Company, Inc. Mercury Indemnity Company of America
Mercury Insurance Company of Illinois Orion Indemnity Company
Mercury Insurance Company of Georgia Mercury Indemnity Company of Georgia
Non-Insurance Companies 
Mercury Select Management Company, Inc. AIS Management LLC
Mercury Insurance Services LLC Auto Insurance Specialists LLC
Animas Funding LLC(3)
 PoliSeek AIS Insurance Solutions, Inc.
Fannette Funding LLC(3)
 Mercury Plus Insurance Services LLC
Upper Animas Holdings LLC(3)
Mercury Information Technology Services LLC(4)
Mercury (Shanghai) Information Technology Services Co., Ltd. ("Mercury Shanghai")(5)
 __________
(1)Effective August 13, 2025, American Mercury Lloyds Insurance Company was converted from a Lloyd's plan to a stock company and changed the company name to Mercury Insurance Company of Texas.
(2)Mercury County Mutual Insurance Company is not owned but is controlled by the Company through a management contract.
(3)Special purpose investment vehicle.
(4)Parent company of Mercury Shanghai.
(5)Mercury Shanghai provides software development and related technical services to the Company's subsidiaries.

The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP"), which differ in some respects from those filed in reports to insurance regulatory authorities. All intercompany transactions and balances have been eliminated.
Certain prior period amounts have been reclassified to conform with the current period presentation.

The Company did not have other comprehensive income (loss) in 2025, 2024 and 2023.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and
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assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. These estimates require the Company to apply complex assumptions and judgments, and often the Company must make estimates about effects of matters that are inherently uncertain and will likely change in subsequent periods. The most significant assumptions in the preparation of these consolidated financial statements relate to reserves for losses and loss adjustment expenses. Actual results could differ from those estimates.
Investments and Other Financial Instruments

Financial instruments recorded in the consolidated balance sheets include investments, notes receivable, other receivables, accounts payable, options sold, and notes payable. The Company’s investments include securities issued by the U.S. government and its agencies, securities issued by states and municipal governments and agencies, certain corporate and other debt securities, equity securities, and exchange traded funds.

The Company applies the fair value option to all fixed maturity and equity securities and short-term investments at the time an eligible item is first recognized. The primary reasons for electing the fair value option were simplification and cost benefit considerations as well as the expansion of the use of fair value measurement by the Company consistent with the long-term measurement objectives of the Financial Accounting Standards Board (the "FASB") for accounting for financial instruments. Gains and losses due to changes in fair value for items measured at fair value pursuant to application of the fair value option are included in net realized investment gains in the Company's consolidated statements of operations, while interest and dividend income on investment holdings are recognized on an accrual basis on each measurement date and are included in net investment income in the Company's consolidated statements of operations. The Company’s fixed maturity and equity securities are classified as “trading” and carried at fair value as required when applying the fair value option. The majority of equity holdings, including non-redeemable preferred stocks, are actively traded on national exchanges or trading markets, and are valued at the last transaction price on the balance sheet date.

 The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Due to their short-term maturity, the carrying values of other receivables and accounts payable approximate their fair values. 98.6% of the fair value of the Company's investments at December 31, 2025 is based on observable market prices, observable pricing parameters, or is derived from such prices or parameters. The availability of observable market prices and pricing parameters can vary by financial instrument. Observable market prices and pricing parameters of a financial instrument, or a related financial instrument, are used to derive a price without requiring significant judgment.

The Company may hold or acquire financial instruments that lack observable market prices or pricing parameters because they are less actively traded currently or in future periods. The fair value of such instruments is determined using techniques appropriate for each particular financial instrument. These techniques may involve some degree of judgment. The price transparency of the particular financial instrument will determine the degree of judgment involved in determining the fair value of the Company’s financial instruments. Price transparency is affected by a wide variety of factors, including the type of financial instrument, whether it is a new financial instrument and not yet established in the marketplace, and the characteristics particular to the transaction. Financial instruments for which actively quoted prices or pricing parameters are available or for which fair value is derived from actively quoted prices or pricing parameters will generally have a higher degree of price transparency. By contrast, financial instruments that are thinly traded or not quoted will generally have diminished price transparency. Even in normally active markets, the price transparency for actively quoted financial instruments may be reduced during periods of market dislocation. Alternatively, in thinly quoted markets, the participation of market makers willing to purchase and sell a financial instrument provides a source of transparency for products that otherwise are not actively quoted. For a further discussion, see Note 4. Fair Value Measurements.

Fixed maturity securities include debt securities, which may have fixed or variable principal payment schedules, may be held for indefinite periods of time, and may be used as a part of the Company’s asset/liability strategy or sold in response to changes in interest rates, anticipated prepayments, risk/reward characteristics, liquidity needs, tax planning considerations, or other economic factors. Premiums and discounts on fixed maturities are amortized using first call date and are adjusted for anticipated prepayments. Premiums and discounts on mortgage-backed securities are adjusted for anticipated prepayment using the retrospective method, with the exception of some beneficial interests in securitized financial assets, which are accounted for using the prospective method.

Equity securities consist of non-redeemable preferred stocks, common stocks on which dividend income is partially tax-sheltered by the 50% corporate dividend received deduction, and private equity funds.
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Short-term investments include money market accounts, options, and short-term bonds that are highly rated short duration securities and redeemable within one year.

In the normal course of investing activities, the Company either forms or enters into relationships with variable interest entities ("VIEs"). A VIE is an entity that either has investors that lack certain essential characteristics of a controlling financial interest, such as simple majority kick-out rights, or lacks sufficient funds to finance its own activities without financial support provided by other entities. The Company performs ongoing qualitative assessments of the VIEs to determine whether the Company has a controlling financial interest in the VIE and therefore is the primary beneficiary. The Company is deemed to have a controlling financial interest when it has both the ability to direct the activities that most significantly impact the economic performance of the VIE and the obligation to absorb losses or right to receive benefits from the VIE that could potentially be significant to the VIE. Based on the Company's assessment, if it determines it is the primary beneficiary, the Company consolidates the VIE in its consolidated financial statements.

From time to time, the Company forms special purpose investment vehicles to facilitate its investment activities involving derivative instruments such as total return swaps, or limited partnerships such as private equity funds. These special purpose investment vehicles are consolidated VIEs as the Company has determined it is the primary beneficiary of such VIEs. Creditors have no recourse against the Company in the event of default by these VIEs. The Company had no implied or unfunded commitments to these VIEs at December 31, 2025 and 2024. The Company's financial or other support provided to these VIEs and its loss exposure are limited to its collateral and original investment.

The Company invests, directly or indirectly through its consolidated VIEs, in limited partnerships or limited liability companies such as private equity funds. These investments are non-consolidated VIEs as the Company has determined it is not the primary beneficiary of such VIEs. The Company's maximum exposure to loss with respect to these VIEs is limited to the total carrying value that is included in equity securities in the Company's consolidated balance sheets. At December 31, 2025 and 2024, the Company had approximately $4 million and $5 million, respectively, in unfunded commitments to these VIEs.

Securities on Deposit

As required by statute, the Company’s insurance subsidiaries have securities deposited with the departments of insurance or similar governmental agencies in the states in which they are licensed to operate ("DOI") with fair values totaling approximately $16 million and $15 million at December 31, 2025 and 2024, respectively.

Deferred Policy Acquisition Costs

Deferred policy acquisition costs consist of commissions paid to outside agents, premium taxes, salaries, and certain other underwriting costs that are incremental or directly related to the successful acquisition of new and renewal insurance contracts and are amortized over the life of the related policy in proportion to premiums earned. Deferred policy acquisition costs are limited to the amount that will remain after deducting from unearned premiums and anticipated investment income, the estimated losses and loss adjustment expenses, and the servicing costs that will be incurred as premiums are earned. The Company’s deferred policy acquisition costs are further limited by excluding those costs not directly related to the successful acquisition of insurance contracts. The Company does not defer advertising expenditures but expenses them as incurred.

The table below presents a summary of deferred policy acquisition cost amortization and net advertising expense:
Year Ended December 31,
202520242023
(Amounts in millions)
Deferred policy acquisition cost amortization
$942.9 $858.3 $708.5 
Net advertising expense
32.0 20.8 8.9 
Fixed Assets
Fixed assets are stated at historical cost less accumulated depreciation and amortization. A fixed asset classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell, and is presented separately from other fixed assets. The useful life for buildings is 40 years. Furniture, equipment, and purchased software are depreciated on a combination of straight-line and accelerated methods over 3 to 7 years. The Company has capitalized certain consulting costs, payroll, and payroll-related costs for employees related to computer software developed for internal use, which are amortized
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on a straight-line method over the estimated useful life of the software, generally not exceeding 7 years. In accordance with applicable accounting standards, capitalization ceases no later than the point at which a computer software project is substantially complete and ready for its intended use. Leasehold improvements are amortized over the shorter of the useful life of the assets or the life of the associated lease.

The Company periodically assesses long-lived assets or asset groups including building and equipment, for recoverability when events or changes in circumstances indicate that their carrying amounts may not be recoverable. If the Company identifies an indicator of impairment, the Company assesses recoverability by comparing the carrying amount of the asset to the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset. An impairment loss is recognized when the carrying amount is not recoverable and is measured as the excess of carrying value over fair value. There were no impairment charges during 2025, 2024, and 2023.
Goodwill and Other Intangible Assets
Goodwill and other intangible assets arise as a result of business acquisitions and consist of the excess of the cost of the acquisitions over the tangible and intangible assets acquired and liabilities assumed and identifiable intangible assets acquired. Identifiable intangible assets consist of the value of customer relationships, trade names, software and technology, and favorable leases, which are all subject to amortization, and an insurance license which is not subject to amortization.

The Company evaluates goodwill and other intangible assets for impairment annually or whenever events or changes in circumstances indicate that it is more likely than not that the carrying amount of goodwill and other intangible assets may exceed their implied fair values. The Company qualitatively determines whether, more likely than not, the fair value exceeds the carrying amount of a reporting unit. There are numerous assumptions and estimates underlying the qualitative assessments including future earnings, long-term strategies, and the Company’s annual planning and forecasting process. If these planned initiatives do not accomplish the targeted objectives, the assumptions and estimates underlying the qualitative assessments could be adversely affected and have a material effect upon the Company’s financial condition and results of operations. In addition, the Company evaluates other intangible assets using methods similar to those used for goodwill described above. As of December 31, 2025 and 2024, goodwill and other intangible impairment assessments indicated that there was no impairment.
Premium Revenue Recognition
Premium revenue is recognized on a pro-rata basis over the terms of the policies in proportion to the amount of insurance protection provided. Premium revenue includes installment and other fees for services which are recognized in the periods in which the services are rendered. Unearned premiums represent the portion of the written premium related to the unexpired policy term. Unearned premiums are predominantly computed monthly on a pro-rata basis and are stated gross of reinsurance deductions, with the reinsurance deduction recorded in other assets. The Company evaluates its unearned premiums periodically for premium deficiencies by comparing the sum of expected claim costs, unamortized acquisition costs and maintenance costs, partially offset by investment income, to related unearned premiums. To the extent that any of the Company’s lines of insurance business become unprofitable, a premium deficiency reserve may be required. Net premiums written, a statutory measure designed to determine production levels, was $5.72 billion, $5.38 billion, and $4.46 billion in 2025, 2024, and 2023, respectively.
Losses and Loss Adjustment Expenses
Unpaid losses and loss adjustment expenses are determined in amounts estimated to cover incurred losses and loss adjustment expenses and established based upon the Company’s assessment of claims pending and the development of prior years’ loss liabilities. These amounts include liabilities based upon individual case estimates for reported losses and loss adjustment expenses and estimates of such amounts that are incurred but not reported. Changes in the estimated liability are charged or credited to operations as the losses and loss adjustment expenses are re-estimated. The liability is stated net of anticipated salvage and subrogation recoveries, and gross of reinsurance recoverables on unpaid losses.

Estimating loss reserves is a difficult process as many factors can ultimately affect the final settlement of a claim and, therefore, the loss reserve that is required. A key assumption in estimating loss reserves is the degree to which the historical data used to analyze reserves will be predictive of ultimate claim costs on incurred claims. Changes in the regulatory and legal environments, results of litigation, medical costs, the cost of repair materials, and labor rates, among other factors, can impact this assumption. In addition, time can be a critical part of reserving determinations since the longer the span between the incidence of a loss and the payment or settlement of a claim, the more variable the ultimate settlement amount could be. Accordingly, short-tail claims, such as property damage claims, tend to be more reasonably predictable than long-tail liability claims, such as those involving the Company’s bodily injury ("BI") coverages. Management believes that the liability for losses and loss adjustment expenses is adequate to cover the ultimate net cost of losses and loss adjustment expenses
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incurred to date. However, since the provisions for loss reserves are necessarily based upon estimates, the ultimate liability may be more or less than such provisions.

The Company analyzes loss reserves quarterly primarily using the incurred loss method, paid loss method, and average severity method coupled with the claim count development method, as described below. When deciding among methods to use, the Company evaluates the credibility of each method based on the maturity of the data available and the claims settlement practices for each particular line of insurance business or coverage within a line of insurance business. The Company may also evaluate qualitative factors such as known changes in laws or legal ruling that could affect claims handling or other external environmental factors or internal factors that could affect the settlement of claims. When establishing the loss reserve, the Company will generally analyze the results from all of the methods used rather than relying on a single method. While these methods are designed to determine the ultimate losses on claims under the Company’s policies, there is inherent uncertainty in all actuarial models since they use historical data to project outcomes. The Company believes that the techniques it uses provide a reasonable basis in estimating loss reserves.
•The incurred loss method analyzes historical incurred case loss (case reserves plus paid losses) development to estimate ultimate losses. The Company applies development factors against current case incurred losses by accident period to calculate ultimate expected losses. The Company believes that the incurred loss method provides a reasonable basis for evaluating ultimate losses, particularly in the Company’s larger, more established lines of insurance business which have a long operating history.
•The paid loss method analyzes historical payment patterns to estimate the amount of losses yet to be paid.
•The average severity method analyzes historical loss payments and/or incurred losses divided by closed claims and/or total claims to calculate an estimated average cost per claim. From this, the expected ultimate average cost per claim can be estimated. The average severity method coupled with the claim count development method provides meaningful information regarding inflation and frequency trends that the Company believes is useful in establishing loss reserves. The claim count development method analyzes historical claim count development to estimate future incurred claim count development for current claims. The Company applies these development factors against current claim counts by accident period to calculate ultimate expected claim counts.

The Company analyzes catastrophe losses separately from non-catastrophe losses. The Company classifies certain losses as catastrophe losses based on catastrophe events designated by Property Claim Services, a unit of Insurance Services Office, Inc. For catastrophe losses, the Company generally determines claim counts based on claims reported and development expectations from previous catastrophes and applies an average expected loss per claim based on loss reserves established by adjusters and average losses on previous similar catastrophes.

For catastrophe losses that are considered “total losses” where the entire dwelling was destroyed, the Company primarily estimates losses based on the expected amounts to be paid out on the policy limits. Homeowners policies have multiple coverages, including dwelling, additional replacement costs, additional living expenses, and personal property, and on a typical total loss, many, but not all, of the various coverage limits are exhausted. It can take up to five years or longer for total loss claims to close, and the Company will reevaluate its total loss estimates periodically based on many factors, including estimated costs to rebuild if a decision was made to rebuild, actual rebuilding costs incurred, estimated time to rebuild, value of personal belongings destroyed, expected duration for the homeowner to be displaced, and demand surge.

In addition, subrogation may play an important factor in the catastrophe loss estimate. For additional discussion on subrogation, see disclosures on the Palisades and Eaton wildfires in Note 12. Loss and Loss Adjustment Expense Reserves.

Derivative Financial Instruments
The Company accounts for all derivative instruments, other than those that meet the normal purchases and sales exception, as either an asset or liability, measured at fair value, which is based on information obtained from independent parties. In addition, changes in fair value are recognized in earnings unless specific hedge accounting criteria are met. See Note 9. Derivative Financial Instruments.

Earnings (Loss) Per Share
Basic earnings (loss) per share excludes dilution and reflects net income (loss) divided by the weighted average shares of common stock outstanding during the periods presented. Diluted earnings (loss) per share is based on the weighted average shares of common stock and potential dilutive securities outstanding during the periods presented. See Note 17. Earnings (Loss) Per Share, for the required disclosures relating to the calculation of basic and diluted earnings (loss) per share.

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Income Taxes

Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial reporting basis and the respective tax basis of the Company’s assets and liabilities, and expected benefits of utilizing net operating loss, capital loss, and tax-credit carryforwards. The Company assesses the likelihood that its deferred tax assets will be realized and, to the extent management does not believe these assets are more likely than not to be realized, a valuation allowance is established. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates or laws is recognized in earnings in the period that includes the enactment date.

The Company’s deferred income taxes usually include a combination of ordinary and capital deferred tax benefits and expenses. At December 31, 2025, the Company’s deferred income taxes were in a net asset position mainly due to deferred tax assets generated by unearned premiums and loss reserve discounting. These deferred tax assets were substantially offset by deferred tax liabilities resulting from deferred policy acquisition costs. In assessing the Company's ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized, and to the extent management does not believe these assets are more likely than not to be realized, a valuation allowance is established. The ultimate realization of deferred tax assets is dependent upon generating sufficient taxable income of the appropriate character within the carryback and carryforward periods available under the tax law. Management considers the reversal of deferred tax liabilities, projected future taxable income of an appropriate nature, and tax-planning strategies in making this assessment.

On July 4, 2025, the President of the United States signed into law the One Big Beautiful Bill Act (“OBBBA”) which includes significant amendments to the Internal Revenue Code. The OBBBA makes permanent the immediate expensing of domestic research and experimental expenditures and provides a transition rule permitting the accelerated recovery of the unamortized balance of previously capitalized research and experimental costs. The Company’s consolidated financial statements for the year ended December 31, 2025 incorporated an estimate of additional current tax benefits related to the immediate expensing of 2025 domestic research and experimental expenditures and previously unamortized amounts. The change in tax law resulted in reclassifications between current and deferred taxes, with no material impact to combined total tax expense.

Management’s recoverability assessment of the Company’s deferred tax assets which are ordinary in character takes into consideration the Company’s strong history of generating ordinary taxable income and a reasonable expectation that it will continue to generate ordinary taxable income in the future. The Company also has various deferred tax liabilities that represent sources of future ordinary taxable income. Management’s recoverability assessment with regard to its capital deferred tax assets is based on estimates of anticipated capital gains, tax-planning strategies available to generate future taxable capital gains, and the Company's capacity to absorb capital losses carried back to prior years, each of which would contribute to the realization of deferred tax benefits. The Company has significant unrealized gains in its investment portfolio that could be realized through asset dispositions, at management’s discretion. In addition, the Company expects to hold certain debt securities, which are currently in loss positions, to recovery or maturity. Management believes unrealized losses related to these debt securities, which represent a portion of the unrealized loss positions at December 31, 2025, are fully realizable at maturity. Management believes its long-term time horizon for holding these securities allows it to avoid any forced sales prior to maturity. Further, the Company has the capability to generate additional realized capital gains by entering into sale-leaseback transactions using one or more of its appreciated real estate holdings. The realized gains on the real estate holdings could be used to realize both ordinary and capital deferred tax assets. The Company also has the capacity to recoup capital deferred tax assets through tax capital loss carryback claims for taxes paid within permitted carryback periods.
The Company has the capability to implement tax planning strategies and it has a steady history of generating positive cash flows from operations and believes that its liquidity needs can be met in future periods without the forced sale of its investments. This capability assists management in controlling the timing and amount of realized losses generated during future periods. By prudent utilization of some or all of these strategies, management has the intent and believes that it has the ability to generate capital gains and minimize tax losses in a manner sufficient to avoid losing the benefits of its deferred tax assets. Management will continue to assess the need for a valuation allowance on a quarterly basis. Although realization is not assured, management believes it is more likely than not that the Company’s deferred tax assets will be realized.

Contingent Liabilities
The Company has known, and may have unknown, potential liabilities which include claims, assessments, lawsuits, or regulatory fines and penalties relating to the Company’s business. The Company continually evaluates these potential liabilities and accrues for them and/or discloses them in the notes to the consolidated financial statements where required. In addition, the Company accrues for anticipated legal defense costs associated with lawsuits, claims or regulatory actions. The Company does
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not believe that the ultimate resolution of currently pending legal or regulatory proceedings, either individually or in the aggregate, will have a material adverse effect on its financial condition or cash flows. See Note 18. Commitments and Contingencies, for the required disclosures relating to contingent liabilities.

Reinsurance
Liabilities for unearned premiums and unpaid losses are stated in the accompanying consolidated financial statements before deductions for ceded reinsurance. Unpaid losses and unearned premiums that are ceded to reinsurers are carried in reinsurance recoverables and other assets, respectively, in the Company's consolidated balance sheets. Reinsurance recoverables on unpaid losses are estimated based upon assumptions consistent with those used in establishing the liabilities related to the underlying contracts. Most of the Company's reinsurance premiums are recognized ratably over the contract period to the extent coverage remains available. Net premiums earned and losses and loss adjustment expenses are stated net of deductions for ceded reinsurance.

The Company is the assuming reinsurer under a Catastrophe Portfolio Participation Reinsurance Contract ("Contract") effective through December 31, 2028. The Company reimburses up to approximately $30 million in annual losses for a proportional share of a portfolio of catastrophe losses under the Contract, to the extent the actual loss ratio exceeds the threshold loss ratio of 73.5%.

The Company is the assuming reinsurer under a Property Quota Share Reinsurance Contract ("Quota Share Contract") effective through December 31, 2026. The Company reimburses up to approximately $60 million in annual losses for a proportional share of losses based on the premiums ceded to the Company under the Quota Share Contract.

The Company is the assuming reinsurer under a Catastrophe Quota Share Reinsurance Agreement ("Quota Share Agreement") effective through December 31, 2026. The Company reimburses up to approximately $12 million in annual losses for a proportional share of losses based on the premiums ceded to the Company under the Quota Share Agreement.

The Company is party to a Catastrophe Reinsurance Treaty ("Treaty") covering a wide range of perils that is effective through June 30, 2026. The Treaty provides $2,140 million of coverage on a per occurrence basis after covered catastrophe losses exceed the $200 million Company retention limit. The Treaty specifically 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 with certain exceptions. The Treaty provides for one full reinstatement of coverage limits with certain exceptions, and includes some additional minor territorial and coverage restrictions.

The effect of reinsurance on property and casualty premiums written and earned was as follows:

Year Ended December 31,
202520242023
 (Amounts in thousands)
Premiums Written
Direct $5,955,011 $5,474,292 $4,531,942 
Ceded(286,971)(138,015)(109,644)
Assumed26,212 15,489 15,353 
     Net$5,694,252 $5,351,766 $4,437,651 
Premiums Earned
Direct$5,736,954 $5,167,342 $4,339,333 
Ceded(287,032)(136,698)(109,445)
Assumed26,147 15,455 15,481 
     Net$5,476,069 $5,046,099 $4,245,369 

The Company recognized ceded premiums earned of approximately $287 million, $137 million, and $109 million in 2025, 2024, and 2023, respectively, which are included in net premiums earned in its consolidated statements of operations, and ceded losses and loss adjustment expenses of approximately $1,300 million, $(3) million, and $10 million in 2025, 2024, and 2023, respectively, which are included in losses and loss adjustment expenses in its consolidated statements of operations. The comparatively large ceded premiums earned in 2025 is largely due to reinstatement premiums recorded for use of reinsurance benefits associated with the Palisades and Eaton wildfires that occurred in the first quarter of 2025. The large ceded losses and loss adjustment expenses in 2025 is due to losses from the Palisades and Eaton wildfires. The negative ceded losses and loss
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adjustment expenses in 2024 is primarily the result of favorable development on certain of prior years' catastrophe losses that had previously been ceded to the Company's reinsurers.

The Insurance Companies, as primary insurers, are required to pay losses to the extent reinsurers are unable to discharge their obligations under the reinsurance agreements.

Share-Based Compensation

Share-based compensation expenses for all stock options granted or modified are based on their estimated grant-date fair values. The Company recognizes these compensation costs on a straight-line basis over the requisite service period of the award, which is the option vesting term of four years. The fair value of stock option awards is estimated using the Black-Scholes option pricing model with the grant-date assumptions and weighted-average fair values. The Company's phantom stock unit awards are classified as liability awards. The fair value of phantom stock units and compensation expenses associated with such awards are determined based on the market price of the Company's common stock on each reporting date and certain vesting conditions. The Company accounts for forfeitures as they occur in determining the amount of share-based compensation expenses to be recognized in each period. See Note 16. Share-Based Compensation for additional disclosures.

Revenue from Contracts with Customers

The Company's revenue from contracts with customers that are in scope of Topic 606 represents the commission income that the Company's 100% owned insurance agencies, Auto Insurance Specialists LLC ("AIS") and PoliSeek AIS Insurance Solutions, Inc. ("Poliseek"), earned from third-party insurers. The Company's commission income from third-party insurers was approximately $29.6 million, $25.2 million and $20.8 million, with related expenses of approximately $15.2 million, $13.4 million and $11.4 million, for the years ended December 31, 2025, 2024 and 2023, respectively. Due to the immateriality of the Company's commission income and its related expenses to the overall consolidated financial statements, the commission income, net of related expenses, is included in other revenues in the Company's consolidated statements of operations, and in other income of the Property and Casualty business segment in the Company's segment reporting in accordance with Topic 280, Segment Reporting (see Note 19. Segment Information).

AIS and PoliSeek are primarily engaged in the marketing and sales of insurance policies in private passenger automobile, commercial automobile and homeowners lines of business. Their revenues primarily consist of commission income received from property and casualty insurers. The primary performance obligation of AIS and Poliseek in return for the commission income from the insurers is to complete the sale of the policy and deliver the control of the policy to the insurer prior to the policy effective date. The total revenue from the sale of a policy is recognized when the sale is complete and the policy is effective as all the material aspects of the performance obligation are satisfied and the insurer is deemed to obtain control of the insurance policy at that time. The commission income is constrained such that the revenue is recognized only to the extent that the commission income received is not likely to be returned to the insurers due to policy cancellations. Any commission income not received when the sale is complete is recognized as commission income receivable, which is included in other receivables in the Company's consolidated balance sheets. Commission income receivable at December 31, 2025 and 2024 was approximately $2.0 million and $1.7 million, respectively.

A refund liability is recorded for the expected amount of the commission income that has to be returned to the insurers based on estimated policy cancellations. The refund liability is computed for the entire portfolio of contracts as a practical expedient, using the expected value method based on all relevant information, including historical data. The refund liability at December 31, 2025 and 2024 was approximately $1.2 million and $1.1 million, respectively, which was included in other liabilities in the Company's consolidated balance sheets.

As of December 31, 2025 and 2024, the Company had no contract assets and contract liabilities, and no remaining performance obligations associated with unrecognized revenues.

Allowance for Credit Losses

Financial Instruments - Credit Losses (Topic 326) uses the "expected loss" methodology for recognizing credit losses for financial assets that are not accounted for at fair value through net income. The Company's investment portfolio, excluding accrued investment income, was not affected by Topic 326 as it applies the fair value option to all of its investments. The estimated allowance amounts for credit losses at December 31, 2025 and December 31, 2024 primarily related to premiums receivable.


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Premiums Receivable

The majority of the Company's premiums receivable are short-term in nature and are due within a year, consistent with the policy term of its insurance policies sold. Generally, premiums are collected prior to providing risk coverage, minimizing the Company's exposure to credit risk. The Company monitors the credit risk associated with premiums receivable, taking into consideration the fact that credit risk is reduced by the Company's right to offset unearned premiums against premiums receivable. The Company has established an allowance for uncollectible premiums receivable related to credit risk, and the estimated allowance is reviewed quarterly and adjusted as appropriate based on evaluations of balances due from insureds, management’s experience, historical data, current economic conditions, and reasonable and supportable forecasts of future economic conditions that affect the collectibility of the reported amounts. In estimating an allowance for uncollectible premiums receivable, the Company assesses customer balances and write-offs by state, line of business, and the year the premiums were written. The estimated allowance is based on historical write-off percentages adjusted for the effects of current trends and reasonable and supportable forecasts, as well as expected recoveries of amounts written off.

Evaluating the current trends or economic conditions that impact the Company's ability to collect premiums receivable and projecting those into the remaining life of premiums receivable in order to develop a reasonable and supportable forecast of the ultimate collectibility involve significant judgment and assumptions about future economic conditions. The Company monitors the overall credit risk of premiums receivable by regularly reviewing macroeconomic indicators such as trends in unemployment, inflation and interest rates, regulatory developments such as restrictions on cancellation of policies for nonpayment of premiums, and insurance policy specific indicators such as trends in policy cancellations.

The following table presents a summary of changes in allowance for credit losses on premiums receivable:
 Year Ended December 31,
 202520242023
 (Amounts in thousands)
Beginning balance$6,400 $5,300 $5,800 
     Provision during the period for expected credit losses 2,067 3,752 2,819 
Write-off amounts during the period(3,631)(3,559)(3,879)
Recoveries during the period of amounts previously written off 1,164 907 560 
Ending balance $6,000 $6,400 $5,300 

Reinsurance Recoverables

Reinsurance recoverables are balances due to the Company from its reinsurers for paid and unpaid losses and loss adjustment expenses. A credit exposure exists with respect to these balances to the extent that any reinsurer is unable to meet its obligations. The Company has established an allowance for uncollectible reinsurance recoverables related to credit risk, and changes in the allowance are presented as a component of losses and loss adjustment expenses in the Company's consolidated statements of operations. The Company reviews the allowance quarterly and adjusts it as necessary to reflect changes in estimates of uncollectible balances. The Company evaluates the financial condition of its reinsurers and monitors concentration risk to minimize its exposure to significant losses from individual reinsurers. The Company attempts to mitigate its credit risk related to reinsurance by entering into reinsurance arrangements with reinsurers that have high credit ratings and by obtaining collateral as necessary. The primary method of obtaining collateral is through letters of credit. Generally, the Company uses a default analysis to estimate uncollectible reinsurance recoverables. The primary components of the default analysis are reinsurance recoverable balances by reinsurer, net of collateral and any liabilities held by the Company subject to a right of offset, and future default factors used to estimate the probability that the reinsurer may be unable to meet its future obligations in full. The determination of the future default factor is based on a historical default factor published by a major rating agency applicable to the particular financial strength rating class.









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The following table presents a summary of changes in allowance for credit losses on reinsurance recoverables:

 Year Ended December 31,
 202520242023
 (Amounts in thousands)
Beginning balance$— $12 $— 
     Provision during the period for expected credit losses 39 (12)12 
Write-off amounts during the period— — — 
Recoveries during the period of amounts previously written off — — — 
Ending balance $39 $— $12 

Accrued Interest Receivables

The Company made certain accounting policy elections for its accrued interest receivables on the adoption date of Topic 326 as allowed: a) an election to present accrued interest receivable balances separately from the associated financial assets on the balance sheet, and b) an election not to measure an allowance for credit losses on accrued interest receivable amounts and instead write off uncollectible accrued interest amounts in a timely manner by reversing interest income.

As a general policy, the Company writes off the accrued interest receivable balance when it receives a default notice or when the scheduled interest payment is not received, unless management determines that the default is temporary considering all of the relevant information. The Company believes that for the majority of its investment securities, writing off the uncollectible interest receivable balance within a year from the due date is considered timely. In all cases, the Company writes off the accrued interest receivable immediately if management determines that it is not reasonably expected that the payment will be received. The Company's accrued interest receivable balances are included in accrued investment income receivables in its consolidated balance sheets. There were no accrued interest receivable amounts considered uncollectible or written off for the years ended December 31, 2025, 2024 and 2023.

Recently Issued Accounting Standards

In September 2025, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) 2025-06, "Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40)—Targeted Improvements to the Accounting for Internal-Use Software." ASU 2025-06 is intended to improve the operability of Subtopic 350-40 by removing all references to software development project stages so that the guidance is neutral to different software development methods. An entity is required to start capitalizing software costs when both of the following occur: (1) management has authorized and committed to funding the software project, and (2) it is probable that the project will be completed and the software will be used to perform the function intended. Furthermore, ASU 2025-06 supersedes the website development costs guidance and incorporates the recognition requirements for website-specific development costs from Subtopic 350-50 into Subtopic 350-40. ASU 2025-06 is effective for annual and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

In July 2025, the FASB issued ASU 2025-05, "Financial Instruments—Credit Losses (Topic 326)—Measurement of Credit Losses for Accounts Receivable and Contract Assets." ASU 2025-05 is related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under Topic 606. It allows all entities to elect a practical expedient that assumes current conditions as of the balance sheet date do not change for the remaining life of the asset. The update also allows for an accounting policy election, which is not applicable to public business entities. Entities are required to disclose whether they have elected to use the practical expedient and, if applicable, the accounting policy election. ASU 2025-05 is effective for annual and interim reporting periods beginning after December 15, 2025 and is to be applied on a prospective basis. Early adoption is permitted. The Company does not expect this standard to have a material impact on its consolidated financial statements other than additional disclosures.

In November 2024, the Financial Accounting Standards Board ("FASB") issued ASU 2024-03, "Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40)—Disaggregation of Income Statement Expenses." ASU 2024-03 is intended to improve financial reporting by requiring that public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. Although the amendments in ASU 2024-03 do not change or remove current expense disclosure requirements, they
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affect where this information appears in the notes to financial statements because entities are required to include certain current disclosures in the same tabular format disclosure as the other disaggregation requirements in the amendments. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. The Company is evaluating the presentational effect that ASU 2024-03 will have on its notes to consolidated financial statements.

2. Financial Instruments
Financial instruments recorded in the consolidated balance sheets include investments, notes receivable, other receivables, options sold, accounts payable, and notes payable. Due to their short-term maturity, the carrying values of other receivables and accounts payable approximate their fair values. All investments are carried at fair value in the consolidated balance sheets.

The following table presents the fair values of financial instruments:
 December 31,
 20252024
 (Amounts in thousands)
Assets
Investments$6,580,030 $6,076,370 
Notes receivable9,993 31,231 
Liabilities
Options sold 254 213 
Notes payable 573,740 566,812 
Investments

The Company applies the fair value option to all fixed maturity and equity securities and short-term investments at the time an eligible item is first recognized. The cost of investments sold is determined on a first-in and first-out method, and realized and unrealized gains and losses are included in net realized investment gains in the Company's consolidated statements of operations. See Note 3. Investments for additional information.

Notes Receivable

In September 2024, the Company completed the sale of an office building located in Brea, California for a total sale price of $31.5 million. $21.4 million of the total sale price was received in the form of a promissory note. The note receivable was secured by the property sold, and bore interest at an annual rate of 7.0%. The term of the note receivable was four years and interest was paid in quarterly installments. The Company received the full principal payment of the note receivable and accrued interest in September 2025.

In March 2023, the Company completed the sale of an office building located in Clearwater, Florida, for a total sale price of approximately $19.6 million. $9.8 million of the total sale price was received in the form of a promissory note. The note receivable is secured by the property sold, and bears interest at an annual rate of 7.0%. The term of the note receivable is four years and interest is paid in monthly installments.

Interest earned on the notes receivable is recognized in other revenues in the Company's consolidated statements of operations. The Company elected to apply the fair value option to the notes receivable at the time they were first recognized. The fair values of the notes receivable are included in other assets in the Company's consolidated balance sheets, while the changes in fair value of the notes receivable are included in net realized investment gains or losses in the Company's consolidated statements of operations.

Options Sold

The Company writes covered call options through listed and over-the-counter exchanges. When the Company writes an option, an amount equal to the premium received by the Company is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Company as realized gains from investments on the expiration date. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security in determining whether the Company has realized a gain or loss. The
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Company, as writer of an option, bears the market risk of an unfavorable change in the price of the security underlying the written option. Liabilities for covered call options are included in other liabilities in the Company's consolidated balance sheets.

Notes Payable

The fair values of the Company’s publicly traded $375 million unsecured notes at December 31, 2025 and 2024 and its $200 million drawn under the unsecured credit facility at December 31, 2025 and 2024 were obtained from third party pricing services.

For additional disclosures regarding methods and assumptions used in estimating fair values, see Note 4. Fair Value Measurements.

3. Investments

The following table presents gains (losses) due to changes in fair value of investments that are measured at fair value:
 Year Ended December 31,
 202520242023
 (Amounts in thousands)
Fixed maturity securities$49,606 $6,566 $62,833 
Equity securities221 8,352 45,046 
Short-term investments(11)909 107 
       Total gains$49,816 $15,827 $107,986 

The following table presents gross gains (losses) realized on the sales of investments:
 Year Ended December 31,
 202520242023
 (Amounts in thousands)
 Gross
Realized
Gains		Gross
Realized
Losses		NetGross
Realized
Gains		Gross
Realized
Losses		NetGross
Realized
Gains		Gross
Realized
Losses		Net
Fixed maturity securities$2,537 $(19,642)$(17,105)$1,067 $(3,812)$(2,745)$1,783 $(3,246)$(1,463)
Equity securities160,405 (69,613)90,792 96,927 (33,857)63,070 76,844 (91,109)(14,265)
Short-term investments— — — 13 (727)(714)— (4)(4)
Contractual Maturity
At December 31, 2025, fixed maturity holdings rated below investment grade and non-rated comprised 0.9% of total investments at fair value. Additionally, the Company owns securities that are credit enhanced by financial guarantors that are subject to uncertainty related to market perception of the guarantors’ ability to perform. Determining the estimated fair value of municipal bonds could become more difficult should markets for these securities become illiquid. 

The following table presents the estimated fair values of the Company's fixed maturity securities at December 31, 2025 by contractual maturity. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
 Estimated Fair Value
 (Amounts in thousands)
Fixed maturity securities:
Due in one year or less$298,705 
Due after one year through five years766,355 
Due after five years through ten years760,527 
Due after ten years3,604,664 
Total$5,430,251 


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Investment Income
The following table presents a summary of net investment income:
 Year Ended December 31,
 202520242023
 (Amounts in thousands)
Fixed maturity securities$238,271 $207,798 $173,167 
Equity securities35,109 43,107 44,223 
Cash and Short-term investments65,506 37,712 23,741 
Total investment income$338,886 $288,617 $241,131 
Less: investment expense(10,185)(8,628)(6,501)
Net investment income$328,701 $279,989 $234,630 

4. Fair Value Measurements
The Company employs a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date using the exit price. Accordingly, when market observable data are not readily available, the Company’s own assumptions are set to reflect those that market participants would be presumed to use in pricing the asset or liability at the measurement date. Assets and liabilities recorded at fair value on the consolidated balance sheets are categorized based on the level of judgment associated with inputs used to measure their fair value and the level of market price observability, as follows:
Level 1Unadjusted quoted prices are available in active markets for identical assets or liabilities as of the reporting date.
Level 2Pricing inputs are other than quoted prices in active markets, which are based on the following:
a. Quoted prices for similar assets or liabilities in active markets;
b. Quoted prices for identical or similar assets or liabilities in non-active markets; or
c. Either directly or indirectly observable inputs as of the reporting date.
Level 3Pricing inputs are unobservable and significant to the overall fair value measurement, and the determination of fair value requires significant management judgment or estimation.

In certain cases, inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Thus, a Level 3 fair value measurement may include inputs that are observable (Level 1 or Level 2) and unobservable (Level 3). The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the asset or liability.

The Company uses prices and inputs that are current as of the measurement date, including during periods of market disruption. In periods of market disruption, the ability to observe prices and inputs may be reduced for many instruments. This condition could cause an instrument to be reclassified from Level 1 to Level 2, or from Level 2 to Level 3. The Company recognizes transfers between levels at either the actual date of the event or a change in circumstances that caused the transfer.

Summary of Significant Valuation Techniques for Financial Assets and Financial Liabilities
The Company’s fair value measurements are based on the market approach, which utilizes market transaction data for the same or similar instruments. The Company obtained unadjusted fair values on 98.6% of its investment portfolio from an independent pricing service at December 31, 2025.

Level 1 measurements—Fair values of financial assets and financial liabilities are obtained from an independent pricing service, and are based on unadjusted quoted prices for identical assets or liabilities in active markets. Additional pricing services and closing exchange values are used as a comparison to ensure that reasonable fair values are used in pricing the investment portfolio.
U.S. government bonds/Short-term bonds: Valued using unadjusted quoted market prices for identical assets in active markets.
Common stock: Comprised of actively traded, exchange listed U.S. and international equity securities and valued based on
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unadjusted quoted prices for identical assets in active markets.
Money market instruments: Valued based on unadjusted quoted prices for identical assets in active markets.
Options sold: Comprised of free-standing exchange listed derivatives that are actively traded and valued based on quoted prices for identical instruments in active markets.
Level 2 measurements—Fair values of financial assets and financial liabilities are obtained from an independent pricing service or outside brokers, and are based on prices for similar assets or liabilities in active markets or valuation models whose inputs are observable, directly or indirectly, for substantially the full term of the asset or liability. Additional pricing services are used as a comparison to ensure reliable fair values are used in pricing the investment portfolio.
Municipal securities: Valued based on models or matrices using inputs such as quoted prices for identical or similar assets in active markets.
Mortgage-backed securities: Comprised of securities that are collateralized by residential and commercial mortgage loans and valued based on models or matrices using multiple observable inputs, such as benchmark yields, reported trades and broker/dealer quotes, for identical or similar assets in active markets. The Company had holdings of $11.2 million and $16.0 million in commercial mortgage-backed securities at December 31, 2025 and 2024, respectively.

Corporate securities/Short-term bonds: Valued based on a multi-dimensional model using multiple observable inputs, such as benchmark yields, reported trades, broker/dealer quotes and issue spreads, for identical or similar assets in active markets.
Non-redeemable preferred stock: Valued based on observable inputs, such as underlying and common stock of same issuer and appropriate spread over a comparable U.S. Treasury security, for identical or similar assets in active markets.

Collateralized loan obligations ("CLOs"): Valued based on underlying debt instruments and the appropriate benchmark spread for similar assets in active markets.

Other asset-backed securities: Comprised of securities that are collateralized by non-mortgage assets, such as automobile loans, valued based on models or matrices using multiple observable inputs, such as benchmark yields, reported trades and broker/dealer quotes, for identical or similar assets in active markets.

Notes receivable: Valued based on observable inputs, such as benchmark yields, and considering any premium or discount for the differential between the stated interest rate and market interest rates, based on quoted market prices of similar instruments.
Level 3 measurements—Fair values of financial assets are based on inputs that are both unobservable and significant to the overall fair value measurement, including any items in which the evaluated prices obtained elsewhere were deemed to be of a distressed trading level. At December 31, 2025 and 2024, the Company did not have any financial assets or financial liabilities based on Level 3 measurements.
Fair value measurement using NAV practical expedient - The fair values of the Company's investment in private equity funds measured at net asset value are determined using net asset value ("NAV") as advised by the external fund managers and the third party administrators. The NAV of the Company's limited partnership or limited liability company interest in such a fund is based on the manager's and the administrator's valuation of the underlying holdings in accordance with the fund's governing documents and GAAP. In accordance with applicable accounting guidance, private equity funds measured at fair value using the NAV practical expedient are not classified in the fair value hierarchy. At December 31, 2025, the Company had capital invested in four such funds: the strategy of three such funds with a combined fair value of approximately $87.1 million at December 31, 2025 is to provide current income to investors by investing mainly in secured loans, CLOs or CLO issuers, and equity interests in vehicles established to purchase and warehouse loans; and the strategy of the other such fund with a fair value of approximately $7.4 million at December 31, 2025 is to achieve long-term capital appreciation through privately-negotiated venture capital investments in seed- and early-stage portfolio companies with technology-enabled business models. The Company had approximately $4 million in unfunded commitments at December 31, 2025 with respect to the private equity funds measured at NAV. The underlying assets of the funds are expected to be liquidated over the period of approximately one year to seven years from December 31, 2025. In addition, the Company does not have the ability to redeem or withdraw from the funds, or to sell, assign, pledge or transfer its investment, without the consent from the General Partner or Managers of each fund, but will receive distributions based on the liquidation of the underlying assets and the interest proceeds from the underlying assets.

The Company’s financial instruments at fair value are reflected in the consolidated balance sheets on a trade-date basis. Related unrealized gains or losses are recognized in net realized investment gains or losses in the consolidated statements of
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operations. Fair value measurements are not adjusted for transaction costs.

The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair values:
 December 31, 2025
 Level 1Level 2Level 3Total
 (Amounts in thousands)
Assets
Fixed maturity securities:
U.S. government bonds$21,546 $— $— $21,546 
Municipal securities— 3,538,473 — 3,538,473 
Mortgage-backed securities — 297,381 — 297,381 
Corporate securities— 751,602 — 751,602 
Collateralized loan obligations— 722,794 — 722,794 
Other asset-backed securities— 98,455 — 98,455 
Total fixed maturity securities21,546 5,408,705 — 5,430,251 
Equity securities:
Common stock679,594 — — 679,594 
Non-redeemable preferred stock— 38,761 — 38,761 
Private equity funds measured at net asset value (1)
94,432 
Total equity securities679,594 38,761 — 812,787 
Short-term investments:
Short-term bonds— 34,000 — 34,000 
Money market instruments302,978 — — 302,978 
Other14 — — 14 
Total short-term investments302,992 34,000 — 336,992 
Other assets:
Note receivable— 9,993 — 9,993 
Total assets at fair value$1,004,132 $5,491,459 $— $6,590,023 
Liabilities
Other liabilities:
Options sold254 — — 254 
Total liabilities at fair value$254 $— $— $254 

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 December 31, 2024
 Level 1Level 2Level 3Total
 (Amounts in thousands)
Assets
Fixed maturity securities:
U.S. government bonds and agencies$75,874 $17,963 $— $93,837 
Municipal securities— 2,987,054 — 2,987,054 
Mortgage-backed securities— 259,421 — 259,421 
Corporate securities— 841,715 — 841,715 
Collateralized debt obligations— 626,255 — 626,255 
Other asset-backed securities— 105,096 — 105,096 
Total fixed maturity securities75,874 4,837,504 — 4,913,378 
Equity securities:
Common stock741,369 — — 741,369 
Non-redeemable preferred stock— 42,603 — 42,603 
Private equity funds measured at net asset value (1)
95,203 
Total equity securities741,369 42,603 — 879,175 
Short-term investments:
Short-term bonds— 1,655 — 1,655 
Money market instruments282,141 — — 282,141 
Other21 — — 21 
Total short-term investments282,162 1,655 — 283,817 
Other assets:
Notes receivable$— $31,231 $— $31,231 
Total assets at fair value$1,099,405 $4,912,993 $— $6,107,601 
Liabilities
Other liabilities:
Options sold213 — — 213 
Total liabilities at fair value$213 $— $— $213 
__________ 
(1) The fair value is measured using the NAV practical expedient; therefore, it is not categorized within the fair value hierarchy. The fair value amount is presented in this table to permit reconciliation of the fair value hierarchy to the amounts presented in the Company's consolidated balance sheets.

There were no transfers between Levels 1, 2, and 3 of the fair value hierarchy in 2025 and 2024.

At December 31, 2025 and 2024, there were no material assets or liabilities measured at fair value on a nonrecurring basis.
Financial Instruments Disclosed, But Not Carried, at Fair Value
The following tables present the carrying value and fair value of the Company’s financial instruments disclosed, but not carried, at fair value, and the level within the fair value hierarchy at which such instruments are categorized:
 December 31, 2025
 Carrying ValueFair ValueLevel 1Level 2Level 3
 (Amounts in thousands)
Liabilities
Notes payable:
Unsecured notes$374,527 $374,625 $— $374,625 $— 
Unsecured credit facility200,000 199,115 — 199,115 — 
Total$574,527 $573,740 $— $573,740 $— 
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 December 31, 2024
 Carrying ValueFair ValueLevel 1Level 2Level 3
 (Amounts in thousands)
Liabilities
Notes payable:
Unsecured notes$374,128 $367,504 $— $367,504 $— 
Unsecured credit facility200,000 199,308 — 199,308 — 
Total$574,128 $566,812 $— $566,812 $— 

Unsecured Notes
The fair value of the Company’s publicly traded $375 million unsecured notes at December 31, 2025 and 2024 was based on the spreads above the risk-free yield curve. These spreads are generally obtained from the new issue market, secondary trading and broker-dealer quotes. See Note 8. Notes Payable for additional information on unsecured notes.
Unsecured Credit Facility
The fair value of the Company's $200 million drawn under the unsecured credit facility at December 31, 2025 and 2024 are based on the unadjusted quoted price for similar notes in active markets. See Note 8. Notes Payable for additional information on unsecured credit facility.

5. Fixed Assets
The following table presents the components of fixed assets:
 December 31,
 20252024
 (Amounts in thousands)
Land$4,949 $6,665 
Buildings and improvements40,776 35,602 
Furniture and equipment30,683 29,291 
Capitalized software414,513 386,116 
Leasehold improvements1,889 1,957 
492,810 459,631 
Less: accumulated depreciation and amortization(345,930)(321,454)
Fixed assets, net$146,880 $138,177 

Depreciation expense, including amortization of leasehold improvements, was $49.6 million, $37.4 million, and $33.8 million for 2025, 2024, and 2023, respectively.
An office building located in Oklahoma City, Oklahoma was classified as a property held for sale at April 30, 2024, and a loss of $1.0 million was recognized as a result of the held-for-sale classification. The Company completed the sale of this property in September 2024 for a total sale price of $3.6 million, and recognized an additional loss of $0.1 million at closing of the sale. Losses recognized at the held-for-sale classification and closing of the sale are included in other revenues in the Company's consolidated statement of operations for the year ended December 31, 2024.
The Company completed the sale of another office building located in Brea, California in September 2024 for a total sale price of $31.5 million, and recognized a gain of $20.3 million associated with the sale, which is included in other revenues in the Company's consolidated statement of operations for the year ended December 31, 2024. $21.4 million of the total sale price was received in the form of a promissory note. $9.3 million of the total sale price, after settlement of selling expenses and outstanding amounts due on the property, was received in cash. Only the cash received on the sale of the property is included in the Company's consolidated statement of cash flows for the year ended December 31, 2024. The note receivable was secured by the property sold and bore interest at an annual rate of 7.0%. The term of the note receivable was 4 years and interest was paid in quarterly installments. The Company received the full principal payment of the note receivable and accrued interest in September 2025.

An office building located in Folsom, California was classified as a property held for sale at June 30, 2024, and a loss of
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$5.4 million recognized as a result of the held-for-sale classification is included in other revenues in the Company's consolidated statement of operations for the year ended December 31, 2024. The Company completed the sale of this property in May 2025 for a total sale price of $13.0 million, and recognized a gain of $2.7 million at closing of the sale, which is included in other revenues in the Company's consolidated statement of operations for the year ended December 31, 2025.

6. Deferred Policy Acquisition Costs
Deferred policy acquisition costs were as follows:
 December 31,
 202520242023
 (Amounts in thousands)
Balance, beginning of year$335,332 $293,844 $266,475 
Policy acquisition costs deferred967,331 899,749 735,894 
Amortization(942,939)(858,261)(708,525)
Balance, end of year$359,724 $335,332 $293,844 

7. Leases

The Company has operating leases for office space for insurance operations and administrative functions, automobiles for certain employees and general uses, and office equipment such as printers and computers. In addition, the Company has finance leases for electronic data processing ("EDP") equipment. As of December 31, 2025, the Company's leases had remaining terms ranging from less than one year to approximately eleven years. These leases may contain provisions for periodic adjustments to rates and charges applicable under such lease agreements. These rates and charges also may vary with the Company's level of use. Certain of these leases include one or more options to renew or early terminate, and the exercise of these options is at the Company's sole discretion. Certain leases also include options to purchase the leased property. The Company's lease agreements do not contain any residual value guarantees.

The Company determines if an arrangement is a lease at inception. Right-of-use ("ROU") assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Lease assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

The Company uses its estimated incremental borrowing rate for leases for office space, office equipment and EDP equipment, which is derived from information available at the lease commencement date, in determining the present value of lease payments, as the rate implicit in the lease is not readily available for such leases. The Company gives consideration to its recent debt issuances as well as publicly available data for instruments with similar characteristics when calculating its incremental borrowing rates. For automobile leases, the Company uses the rate implicit in the lease at the lease commencement date in determining the present value of lease payments, as the readily-determinable implicit rate is provided in such leases.

The Company's lease terms include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. The Company does not use the short-term lease exemption practical expedient and records all leases on the balance sheets, including leases with a term of twelve months or less. The Company accounts for the lease and non-lease components as a single lease component for leases for office space, automobiles, and office equipment, while it accounts for the lease components separately from the non-lease components for EDP equipment leases.














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The components of lease cost along with its classification on the Company's consolidated statements of operations were as follows:
Year Ended December 31,
Lease CostClassification202520242023
(Amounts in thousands)
Operating lease cost (1)
Other operating expenses$8,599 $9,834 $11,687 
Finance lease cost:
     Amortization of assetsOther operating expenses1,468 1,585 1,241 
     Interest on lease liabilitiesInterest expense42 126 40 
Variable lease cost (1)
Other operating expenses277 403 1,100 
Sublease income (2)
Other revenue(238)(469)(799)
Net lease cost$10,148 $11,479 $13,269 
__________ 
(1) Includes short-term leases, which are immaterial.
(2) The Company subleased certain leased office space to third parties in 2025, 2024 and 2023.

The components of lease assets and liabilities along with their classification on the Company's consolidated balance sheets were as follows:
December 31,
Lease Assets and LiabilitiesClassification20252024
(Amounts in thousands)
Operating lease assetsOperating lease right-of-use assets$12,125 $13,407 
Operating lease liabilitiesOperating lease liabilities12,328 13,580 
Finance lease assetsOther assets1,498 2,966 
Finance lease liabilitiesOther liabilities1,150 2,521 

Weighted-average lease term and discount rate were as follows:
December 31,
20252024
Weighted-average remaining lease term (in years):
      Operating leases2.82.9
      Finance leases 1.92.4
Weighted-average discount rate:
      Operating leases6.05 %5.68 %
      Finance leases
3.16 %2.54 %

Supplemental cash flow and other information related to leases was as follows:
Year Ended December 31,
202520242023
 (Amounts in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
      Operating cash flows from operating leases$8,511 $9,485 $14,023 
      Operating cash flows from finance leases40 68 41 
      Financing cash flows from finance leases1,372 1,533 1,102 
 
ROU assets obtained in exchange for lease liabilities:
      Operating leases7,325 6,924 6,587 
      Finance leases— — — 

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Maturities of lease liabilities as of December 31, 2025 were as follows:
YearOperating LeasesFinance Leases
 (Amounts in thousands)
2026$5,982 $785 
20273,716 381 
20282,409 — 
20291,209 — 
2030322 — 
2031 and thereafter$— $— 
          Total lease payments$13,638 $1,166 
Less: Imputed interest1,310 16 
          Total lease obligations$12,328 $1,150 

As of December 31, 2025, the Company had additional lease commitments that have not yet commenced of approximately $8 million with each lease term of approximately three to eleven years. These leases will commence in 2026.

8. Notes Payable

The following table presents information about the Company's notes payable:
December 31,
LenderInterest RateExpiration20252024
(Amounts in thousands)
Senior unsecured notes(1)
Publicly traded4.40%March 15, 2027$375,000 $375,000 
Unsecured credit facility(2)
Bank of America, Wells Fargo Bank, BMO Bank, and U.S. Bank
Term SOFR plus 112.5-150.0 basis points
November 18, 2027200,000 200,000 
    Total principal amount575,000 575,000 
Less unamortized discount and debt issuance costs(3)
473 872 
Total$574,527 $574,128 
__________
(1)On March 8, 2017, the Company completed a public debt offering issuing $375 million of senior notes. The notes are unsecured senior obligations of the Company, with a 4.4% annual coupon payable on March 15 and September 15 of each year commencing September 15, 2017. These notes mature on March 15, 2027. The Company used the proceeds from the notes to pay off amounts outstanding under the existing loan and credit facilities and for general corporate purposes. The Company incurred debt issuance costs of approximately $3.4 million, inclusive of underwriters' fees. The notes were issued at a slight discount of 99.847% of par, resulting in the effective annualized interest rate, including debt issuance costs, of approximately 4.45%.
(2)On March 31, 2021, the Company entered into an unsecured $75 million five-year revolving credit facility. On November 18, 2022, the Company entered into the First Amendment to this credit facility. The First Amendment extended the maturity date of the loan to November 16, 2026 from March 31, 2026 with possible further extension if certain conditions are met, increased the aggregate commitments by all the lenders to $200 million from $75 million, and replaced the LIBOR with the term SOFR. On November 30, 2023, the Company entered into the Second Amendment to this credit facility, which further increased the aggregate commitments by all the lenders to $250 million from $200 million. On November 22, 2024, the Company entered into the Third Amendment to this credit facility, which extended and fixed the maturity date of the loan to November 18, 2027. The interest rates on borrowings under the credit facility are based on the Company's debt to total capital ratio and range from Term SOFR plus 112.5 basis points when the ratio is under 20% to Term SOFR plus 150.0 basis points when the ratio is greater than or equal to 30%. Commitment fees for the undrawn portions of the credit facility range from 12.5 basis points when the ratio is under 20% to 22.5 basis points when the ratio is greater than or equal to 30%. The debt to total capital ratio is expressed as a percentage of (a) consolidated debt to (b) consolidated shareholders' equity plus consolidated debt. The Company's debt to total capital ratio was 19.2% at December 31, 2025, resulting in a 12.5 basis point commitment fee on any undrawn portion of the credit facility. As of February 17, 2026, a total of $200 million was drawn under this facility on a three-month revolving
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basis at an annual interest rate of approximately 5.09%, with $50 million available to be drawn. The Company contributed $150 million of the total amount drawn to the surplus of its consolidated insurance subsidiaries in 2023, and used the remainder for general corporate purposes.
(3)The unamortized discount and debt issuance costs are associated with the publicly traded $375 million senior unsecured notes. These are amortized to interest expense over the life of the notes, and the unamortized balance is presented in the Company's consolidated balance sheets as a direct deduction from the carrying amount of the debt. The unamortized costs of approximately $0.4 million associated with entering into the $250 million unsecured revolving credit facility maturing on November 18, 2027 are included in other assets in the Company's consolidated balance sheets and amortized to interest expense over the term of the credit facility.

The Company was in compliance with all of its financial covenants pertaining to minimum statutory surplus, debt to total capital ratio, and risk based capital ("RBC") ratio under the unsecured credit facility at December 31, 2025.

Debt maturities for each of the next five years and thereafter as of December 31, 2025 are as follows:
MaturityAmounts
(in thousands)
2026$— 
2027575,000 
2028— 
2029— 
2030— 
Thereafter— 
Total$575,000 

9. Derivative Financial Instruments
The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed by using derivative instruments are equity price risk and interest rate risk. Equity contracts (options sold) on various equity securities are intended to manage the price risk associated with forecasted purchases or sales of such securities. From time to time, the Company also enters into derivative contracts to enhance returns on its investment portfolio.

The following tables present the location and amounts of derivative fair values in the consolidated balance sheets and derivative gains in the consolidated statements of operations:
 Liability Derivatives
 December 31, 2025December 31, 2024
 (Amounts in thousands)
Options sold - Other liabilities$254 $213 
Total derivatives$254 $213 
 
 Gains Recognized in Net Income
 Year Ended December 31,
202520242023
 (Amounts in thousands)
Options sold - Net realized investment gains$7,683 $13,395 $8,586 
Total$7,683 $13,395 $8,586 

Most options sold consist of covered calls. The Company writes covered calls on underlying equity positions held as an enhanced income strategy that is permitted for the Company’s insurance subsidiaries under statutory regulations. The Company manages the risk associated with covered calls through strict capital limitations and asset diversification throughout various industries. For additional disclosures regarding equity contracts, see Note 4. Fair Value Measurements for additional disclosures regarding options sold.


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10. Goodwill and Other Intangible Assets

Goodwill
There were no changes in the carrying amount of goodwill during 2025 and 2024. No accumulated goodwill impairment losses existed at December 31, 2025 and 2024. Goodwill is reviewed annually for impairment and more frequently if potential impairment indicators exist. No impairment indicators were identified during 2025 and 2024. All of the Company's goodwill is associated with the Property and Casualty business segment (See Note 19. Segment Information for additional information on the reportable business segment).

Other Intangible Assets
The following table presents the components of other intangible assets:
Gross Carrying
Amount		Accumulated
Amortization		Net Carrying
Amount		Useful Lives
 (Amounts in thousands)(in years)
As of December 31, 2025
Customer relationships$55,107 $(54,172)$935 10
Trade names15,400 (10,908)4,492 24
Technology4,300 (4,300)— 10
Insurance license1,400 — 1,400 Indefinite
Total intangible assets, net$76,207 $(69,380)$6,827 
As of December 31, 2024
Customer relationships$55,107 $(53,958)$1,149 10
Trade names15,400 (10,267)5,133 24
Technology4,300 (4,300)— 10
Insurance license1,400 — 1,400 Indefinite
Total intangible assets, net$76,207 $(68,525)$7,682 

Other intangible assets are reviewed annually for impairment and more frequently if potential impairment indicators exist. No impairment indicators were identified during 2025 and 2024.

Other intangible assets with definite useful lives are amortized on a straight-line basis over their useful lives. Other intangible assets amortization expense was $0.9 million for each of the years ended December 31, 2025, 2024 and 2023. None of the intangible assets with definite useful lives are anticipated to have a residual value.

The following table presents the estimated future amortization expense related to other intangible assets as of December 31, 2025:
Year Ending December 31,Amortization Expense
 (Amounts in thousands)
2026$856 
2027856 
2028856 
2029811 
2030765 
Thereafter1,283 
Total$5,427 







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11. Income Taxes

Income tax provision
The Company's income before provision for income taxes consisted of the following:
 Year Ended December 31,
 202520242023
 (Amounts in thousands)
Domestic$663,271 $574,756 $99,428 
Foreign378 124 — 
Income before provision for income taxes$663,649 $574,880 $99,428 

The Company and its subsidiaries file a consolidated federal income tax return. The income tax expense (benefit) consisted of the following components:
 Year Ended December 31,
 202520242023
 (Amounts in thousands)
Federal
Current$106,317 $119,900 $(3,840)
Deferred15,072 (14,617)10,523 
$121,389 $105,283 $6,683 
State
Current$1,002 $(138)$(2,958)
Deferred146 1,776 (633)
$1,148 $1,638 $(3,591)
Foreign
Current$20 $6 $— 
Deferred(2)— — 
$18 $6 $— 
Total
Current$107,339 $119,768 $(6,798)
Deferred15,216 (12,841)9,890 
Total$122,555 $106,927 $3,092 
 
In computing taxable income, property and casualty insurers reduce underwriting income by losses and loss adjustment expenses incurred. The amount of the deduction for losses incurred associated with unpaid losses is discounted at the interest rates and for the loss payment patterns prescribed by the U.S. Treasury.
















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The following table presents a reconciliation of the tax expense based on the statutory rate of 21% to the Company's actual tax expense in the consolidated statements of operations for 2025, 2024 and 2023 :
 Year Ended December 31,
 202520242023
 (Amounts in thousands)
Computed tax expense at 21%$139,366 21.0 %$120,725 21.0 %$20,880 21.0 %
State and local income tax, net of federal income tax effect (1)
907 0.1 %2,033 0.4 %(191)(0.2)%
Foreign tax effect(61)— %(20)— %— — %
Effect of changes in tax laws or rates enacted in current year— — %— — %— — %
Effect of cross-border tax laws34 — %14 — %— — %
Tax credits(2,543)(0.4)%(1,479)(0.3)%(580)(0.6)%
Changes in valuation allowance— — %— — %— — %
Nontaxable or nondeductible Items
Tax-exempt interest income(15,627)(2.4)%(13,114)(2.3)%(13,640)(13.7)%
Dividends received deduction(1,050)(0.2)%(1,276)(0.2)%(1,237)(1.2)%
Nondeductible expenses1,789 0.3 %815 0.1 %639 0.6 %
Change in unrecognized tax benefits— — %(753)(0.1)%(2,696)(2.7)%
Other, net(260)— %(18)— %(83)(0.1)%
Income tax expense$122,555 18.5 %$106,927 18.6 %$3,092 3.1 %
__________
(1)State taxes in California made up the majority (more than 50%) of the tax effect in this category.
Deferred Income Taxes
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial reporting basis and the respective tax basis of the Company’s assets and liabilities, and expected benefits of utilizing net operating loss, capital loss, and tax-credit carryforwards. The ultimate realization of deferred tax assets is dependent upon generating sufficient taxable income of the appropriate character within the carryback and carryforward periods available under the tax law. Management considers the reversal of deferred tax liabilities, projected future taxable income of an appropriate nature, and tax-planning strategies in making this assessment. The Company believes that through the use of prudent tax planning strategies and the generation of capital gains, sufficient income will be realized in order to maximize the full benefits of its deferred tax assets.























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The following table presents the significant components of the Company’s net deferred tax assets and liabilities:
 December 31,
 20252024
 (Amounts in thousands)
Deferred tax assets:
20% of net unearned premiums$98,571 $88,940 
Discounting of loss reserves and salvage and subrogation recoverable for tax purposes39,429 30,734 
Expense accruals22,339 19,821 
Other deferred tax assets2,943 4,371 
Total gross deferred tax assets163,282 143,866 
Deferred tax liabilities:
Deferred policy acquisition costs(75,542)(70,420)
Tax liability on net unrealized gain on securities carried at fair value(13,702)(3,253)
Tax depreciation in excess of book depreciation(19,173)(2,549)
Undistributed earnings of insurance subsidiaries(2,999)(2,731)
Tax amortization in excess of book amortization(8,639)(8,769)
Other deferred tax liabilities(12,590)(10,290)
Total gross deferred tax liabilities(132,645)(98,012)
Net deferred tax assets$30,637 $45,854 

The Company had federal net operating loss carryforwards of approximately $1.4 million and $1.6 million at December 31, 2025 and 2024, respectively. $1.4 million of the total federal net operating loss carryforward will begin to expire in 2029.

Uncertainty in Income Taxes
The Company recognizes tax benefits related to positions taken, or expected to be taken, on its tax returns, only if the positions are "more-likely-than-not" sustainable. Once this threshold has been met, the Company’s measurement of its expected tax benefits is recognized in its financial statements.

The Company and its subsidiaries file income tax returns with the Internal Revenue Service and the taxing authorities of various states. Tax years that remain subject to examination by major taxing jurisdictions are 2022 through 2024 for federal taxes and 2021 through 2024 for state taxes.

The following table presents a reconciliation of the beginning and ending balances of unrecognized tax benefits:
December 31,
20252024
 (Amounts in thousands)
Balance at January 1$— $2,262 
Additions (reductions) based on tax positions related to:
     Current year— — 
     Prior years (1)
— (2,262)
Balance at December 31$— $— 
____________
(1)The decrease in unrecognized tax benefits for the 12 months ended December 31, 2024 primarily resulted from the payment of the assessed amount related to a California Franchise Tax Board audit for tax year 2011 to resolve outstanding issues.

The Company recognizes interest and penalties related to unrecognized tax benefits as a part of income taxes. The Company recognized an accrued net benefit related to interest and penalties of approximately $2.1 million, and $1.2 million for the years ended December 31, 2024 and 2023, respectively. The Company carried an accrued interest and penalty balance of
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approximately $0.4 million at December 31, 2025 and 2024.

12. Loss and Loss Adjustment Expense Reserves
The following table presents the activity in loss and loss adjustment expense reserves:
 Year Ended December 31,
 202520242023
 (Amounts in thousands)
Gross reserves at January 1$3,152,031 $2,785,702 $2,584,910 
Reinsurance recoverables on unpaid losses(28,645)(32,148)(25,323)
Net reserves at January 13,123,386 2,753,554 2,559,587 
Incurred losses and loss adjustment expenses related to:
Current year4,055,014 3,659,724 3,553,801 
Prior years(91,983)24,787 (35,948)
Total incurred losses and loss adjustment expenses3,963,031 3,684,511 3,517,853 
Loss and loss adjustment expense payments related to:
Current year2,060,739 1,963,076 2,080,690 
Prior years1,426,348 1,351,603 1,243,196 
Total payments3,487,087 3,314,679 3,323,886 
Net reserves at December 313,599,330 3,123,386 2,753,554 
Reinsurance recoverables on unpaid losses34,008 28,645 32,148 
Gross reserves at December 31$3,633,338 $3,152,031 $2,785,702 

The severe inflationary trend of 2022 continued into 2023, but moderated as the year progressed. During 2024 and 2025, the inflation rate continued to be moderate for automobile parts and labor but it was at an elevated level for bodily injury costs.

The decrease in the provision for insured events of prior years in 2025 of approximately $92.0 million primarily resulted from favorable development of approximately $59 million in private passenger and commercial automobile insurance (see the corresponding development table below), favorable development of approximately $29 million in homeowners insurance (see the corresponding development table below), and unfavorable development of approximately $4 million in commercial property insurance (see the corresponding development table below). The remaining net favorable development of approximately $8 million relates to other smaller lines of insurance business as well as unallocated loss adjustment expenses.

The increase in the provision for insured events of prior years in 2024 of approximately $24.8 million primarily resulted from unfavorable development of approximately $13 million in private passenger and commercial automobile insurance (see the corresponding development table below), favorable development of approximately $5 million in homeowners insurance (see the corresponding development table below), and unfavorable development of approximately $15 million in commercial property insurance (see the corresponding development table below). The remaining net unfavorable development of approximately $2 million relates to other smaller lines of insurance business as well as unallocated loss adjustment expenses.

The decrease in the provision for insured events of prior years in 2023 of approximately $35.9 million primarily resulted from lower than estimated losses and loss adjustment expenses in the private passenger automobile and homeowners lines of insurance business, partially offset by unfavorable reserve development in the commercial property line of insurance business.

The Company recorded catastrophe losses net of reinsurance of approximately $508 million, $277 million, and $239 million in 2025, 2024, and 2023, respectively. Catastrophe losses incurred in 2025 was reduced by approximately $586 million of subrogation recorded on the Palisades and Eaton wildfires. The majority of 2025 catastrophe losses resulted from the Palisades and Eaton wildfires in California and severe storms in Texas, Oklahoma and California. The majority of 2024 catastrophe losses resulted from tornadoes, hailstorms and convective storms in Texas and Oklahoma, winter storms, rainstorms and wildfires in California, and the impact of Hurricane Helene in Florida and Georgia. The majority of 2023 catastrophe losses resulted from rainstorms and hail in Texas and Oklahoma, winter storms and rainstorms in California, and the impact of Tropical Storm Hilary in California. The Company experienced favorable development of approximately $23 million, unfavorable development of approximately $9 million, and favorable development of approximately $8 million on prior years' catastrophe losses in 2025, 2024, and 2023, respectively.

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In January 2025, extreme wind-driven wildfires caused widespread damage across parts of Southern California, primarily in the communities of Pacific Palisades and Altadena. The two largest of these Southern California wildfires are known as the Palisades and Eaton wildfires. The Company recorded net catastrophe losses and loss adjustment expenses before taxes from the Palisades and Eaton wildfires of approximately $380 million in its consolidated statement of operations for the year ended December 31, 2025. The following table presents the components of net losses and loss adjustment expenses from the Palisades and Eaton wildfires as of December 31, 2025.

 For the Twelve Months Ended December 31, 2025
 (Amounts in thousands)
Gross losses and loss adjustment expenses$2,191,752 
Subrogation recoverable - Eaton fire (1) ***
(537,506)
Subrogation recovered and recoverable - Palisades fire (2) ***
(48,026)
Reinsurance recovered and recoverable (3)
(1,293,500)
Net catastrophe losses and loss adjustment expenses on Eaton and Palisades fires before FAIR Plan$312,720 
Company's share of FAIR Plan losses and loss adjustment expenses (4)
$92,717 
Recoupable portion of FAIR Plan losses and loss adjustment expenses (5)
(25,000)
Net FAIR Plan losses and loss adjustment expenses$67,717 
Net losses and loss adjustment expenses on Eaton and Palisades fires$380,437 
__________ 
(1)    The Company is actively pursuing subrogation against Southern California Edison ("SCE") on the Eaton fire. The Company recorded approximately $538 million in estimated subrogation recoveries, or approximately 55% of its estimated ultimate losses on the Eaton fire, as an offset against loss and loss adjustment expense reserves in its consolidated balance sheet at December 31, 2025, and thereby reduced losses and loss adjustment expenses by the same amount in its consolidated statement of operations for the year ended December 31, 2025. Although SCE has not admitted that its equipment caused the Eaton fire, significant evidence indicates that SCE's equipment was the cause of the Eaton fire. In addition, SCE has disclosed that it is probable that SCE will incur material losses from the Eaton fire and entered into a negotiated agreement without litigation with one insurance company to pay 52% of the losses incurred. For utility-caused California wildfires occurring since 2017 through 2024 where SCE and other utility companies settled the subrogation claims without admitting fault, such companies have paid out average amounts equal to over 60% of the losses incurred with a range as low as 55% to over 70%. The Company believes that SCE has the wherewithal to settle the subrogation claims on the Eaton fire in a similar range of settlement amounts as on the recent past wildfires. SCE also has access to the California Wildfire Fund (the "Fund") that provides additional funding to reimburse member utilities to pay wildfire claims; furthermore, SCE has stated that the administrator of the Fund has confirmed that the Eaton fire is a covered wildfire for purposes of accessing the Fund. Based on the grounds described above as well as management's estimates and assumptions derived from industry experience, including recent market interest in the acquisition of the Company's subrogation rights on the Eaton fire, the Company believes $538 million is a reasonable estimate of probable recovery on the Eaton fire.
(2)    In June 2025, the Company sold its subrogation rights on the Palisades fire to a third party for a guaranteed percentage of losses incurred plus a share in the amount recovered above a certain threshold (“Upside Recovery’). The recovery amount from the guaranteed percentage of losses is approximately $48 million, with $30.6 million received as of December 31, 2025. The remaining balance of approximately $17.4 million at December 31, 2025 will be settled each quarter based on the amount of claims payments the Company makes subsequent to the previous settlement date. The Company recorded the total sale price of approximately $48 million as an offset against losses and loss adjustment expenses in its consolidated statement of operations for the year ended December 31, 2025. The Company did not record an amount for the potential Upside Recovery.
(3)    The Company’s catastrophe reinsurance program for the treaty year ended June 30, 2025 provides approximately $1,290 million of limits on a per occurrence basis after covered catastrophe losses exceed the Company’s retention of $150 million. It also allows the Company to consider catastrophe events that occur within a 150-mile radius as a single occurrence or separate occurrences for reinsurance purposes. The Company treated the Palisades and Eaton wildfires as one event for reinsurance purposes exhausting the full $1,290 million of limits. The $1,290 million of limits used for the Palisades and Eaton wildfires was reduced by $6.5 million for ineligible parametric coverage. The Company also utilized $10 million from a separate property excess of loss reinsurance treaty making the total reinsurance used for the Palisades and Eaton wildfires approximately $1,294 million.
(4)    The Company is a member of the California FAIR Plan, the state's fire insurer of last resort. To the extent the FAIR Plan
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has losses exceeding its capital and reinsurance coverage, the FAIR Plan can assess its member companies for the shortfall based on each company’s California market share. The FAIR Plan had significant losses from the Palisades and Eaton wildfires, and the Company's share of the FAIR Plan losses from the Palisades and Eaton wildfires was approximately $93 million (an amount based on information provided to the Company directly from the FAIR Plan), which was recorded as part of the Company's losses and loss adjustment expenses from the Palisades and Eaton wildfires in its consolidated statement of operations for the year ended December 31, 2025.
(5)    The FAIR Plan assessed the Company $50 million to strengthen the FAIR Plan's capital position following the Palisades and Eaton wildfires in the first quarter of 2025. The California DOI allows for recoupment of 50% or $25 million of the $50 million assessment via a temporary surcharge to the Company's policyholders. The Company has received approval from the California DOI to recoup the $25 million, which partially offset the Company's share of the FAIR Plan's losses of $93 million. Accordingly, the Company recorded a net loss of approximately $68 million for its share of the FAIR Plan's losses from the Palisades and Eaton wildfires in its consolidated statement of operations for the year ended December 31, 2025.

*** Accounting Standards Codification (“ASC”) 944-40-30-2 through 3 and Statement of Statutory Accounting Principles (“SSAP”) No. 55 paragraph 15 require salvage and subrogation recoverables to be deducted from the liability for unpaid claims; therefore, loss and loss adjustment expense reserves on the Company's consolidated balance sheets is shown net of estimated salvage and subrogation recoverables, and losses and loss adjustment expenses on its consolidated statements of operations is shown net of salvage and subrogation. The Company applies this accounting method for salvage and subrogation in a consistent manner for both GAAP and statutory reporting purposes.

As of December 31, 2025, the Company has paid out approximately $1,478 million for losses and loss adjustment expenses related to the Palisades and Eaton wildfires. The Company has received 100% of the reinsurance recoverable amounts billed to its reinsurers through December 31, 2025.

The Company exhausted the catastrophe reinsurance limits for the treaty year ended June 30, 2025 on the Palisades and Eaton wildfires, which triggered a full reinstatement of the limits with payment of $101 million of reinstatement premiums. The reinstatement premiums paid were recorded as reductions to the Company’s net premiums earned and written for the year ended December 31, 2025.






























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The following is information about incurred and paid claims development as of December 31, 2025, net of reinsurance, as well as cumulative claim frequency and the total of incurred-but-not-reported liabilities plus expected development on reported claims included within the net incurred claims amounts for the three major categories of our product lines: private passenger and commercial automobile lines of insurance business, homeowners line of insurance business, and commercial property line of insurance business. As the information presented is for these three major categories of product lines only, the total incurred and paid claims development shown below does not correspond to the aggregate development presented in the table above, which is for all product lines and includes unallocated claims adjustment expenses. The cumulative number of reported claims represents open claims, claims closed with payment, and claims closed without payment. It does not include an estimated amount for unreported claims. The number of claims is measured by claim event (such as a car accident or storm damage) and an individual claim event may result in more than one reported claim. The Company considers a claim that does not result in a liability as a claim closed without payment. 

The information about incurred and paid claims development for the years ended December 31, 2016 to 2024 is presented as unaudited supplementary information.

Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance (Private Passenger and Commercial Automobile Insurance)As of December 31, 2025
Total of Incurred But Not Reported Liabilities Plus Expected Development on Reported ClaimsCumulative Number of Reported Claims
Accident YearFor the Years Ended December 31,
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021(1)
2022(1)
2023(1)
2024(1)
2025
(Amounts in thousands)(Amounts in thousands)
2016$1,672,853 $1,669,642 $1,713,696 $1,731,997 $1,732,410 $1,740,807 $1,743,417 $1,745,513 $1,744,803 $1,744,888 $2,004 155
20171,703,857 1,727,277 1,741,825 1,733,425 1,748,289 1,755,702 1,754,356 1,753,163 1,752,728 2,142 149
20181,781,817 1,773,502 1,785,071 1,806,240 1,807,297 1,811,302 1,814,240 1,815,077 4,408 147
20191,916,269 1,911,268 1,959,262 1,954,151 1,951,924 1,948,995 1,947,907 7,451 148
20201,514,551 1,448,083 1,452,343 1,430,973 1,419,119 1,412,710 10,415 91
20211,811,064 1,879,751 1,854,319 1,834,183 1,825,104 22,530 105
20222,255,032 2,264,193 2,262,432 2,246,862 45,493 116
20232,349,659 2,398,449 2,388,149 113,710 107
20242,420,766 2,403,862 303,767 97
20252,497,147 881,404 87
Total$20,034,434 
__________ 
(1) The information for the years 2016 to 2024 is presented as unaudited supplemental information.

Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance (Private Passenger and Commercial Automobile Insurance)
For the Years Ended December 31,
Accident Year
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021(1)
2022(1)
2023(1)
2024(1)
2025
(Amounts in thousands)
2016$1,094,006 $1,395,199 $1,554,217 $1,656,192 $1,699,069 $1,722,293 $1,736,697 $1,740,902 $1,741,949 $1,742,303 
20171,076,079 1,399,202 1,561,850 1,648,328 1,701,298 1,733,196 1,746,147 1,750,074 1,750,443 
20181,082,127 1,417,637 1,588,049 1,697,228 1,757,923 1,784,876 1,799,373 1,808,159 
20191,134,859 1,494,342 1,698,121 1,828,410 1,896,186 1,925,074 1,936,186 
2020825,398 1,089,096 1,242,000 1,328,686 1,375,466 1,392,868 
2021992,705 1,410,748 1,599,756 1,717,524 1,776,030 
20221,237,725 1,743,364 1,984,312 2,113,914 
20231,313,944 1,835,079 2,093,463 
20241,232,949 1,773,183 
20251,171,903 
Total$17,558,452 
All outstanding liabilities before 2016, net of reinsurance
288 
Loss and allocated loss adjustment expense reserves, net of reinsurance$2,476,270 
__________ 
(1) The information for the years 2016 to 2024 is presented as unaudited supplemental information.
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Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance (Homeowners Insurance)As of December 31, 2025
Total of Incurred But Not Reported Liabilities Plus Expected Development on Reported ClaimsCumulative Number of Reported Claims
Accident YearFor the Years Ended December 31,
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021(1)
2022(1)
2023(1)
2024(1)
2025
(Amounts in thousands)(Amounts in thousands)
2016$250,691 $259,489 $259,497 $259,708 $260,496 $259,984 $259,722 $259,701 $260,179 $260,178 $— 24
2017309,491 295,163 288,322 289,869 289,294 291,360 290,909 291,804 291,665 — 30
2018311,798 308,361 310,695 305,292 306,347 308,345 306,857 306,283 401 25
2019359,643 366,139 361,421 360,609 360,140 362,401 362,031 1,100 30
2020420,257 411,404 413,882 411,408 411,127 410,554 1,743 29
2021510,724 511,311 504,086 501,214 497,330 3,642 31
2022578,489 562,562 567,123 566,011 11,525 31
2023717,988 709,918 707,270 16,684 42
2024730,818 711,387 36,532 31
2025952,227 237,884 25
Total$5,064,936 
__________ 
(1) The information for the years 2016 to 2024 is presented as unaudited supplemental information.

Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance (Homeowners Insurance)
For the Years Ended December 31,
Accident Year
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021(1)
2022(1)
2023(1)
2024(1)
2025
(Amounts in thousands)
2016$173,537 $234,215 $245,878 $253,919 $256,642 $258,477 $259,045 $259,875 $260,095 $260,115 
2017217,900 269,254 278,341 283,311 286,531 290,291 290,984 291,595 291,536 
2018213,038 271,534 286,658 294,099 300,742 303,053 305,175 305,583 
2019240,240 324,953 340,237 350,288 355,697 359,466 360,468 
2020271,208 365,910 386,297 395,412 401,079 406,856 
2021316,314 458,124 473,644 485,001 490,197 
2022339,242 501,075 530,772 546,270 
2023474,713 636,330 668,003 
2024449,119 627,603 
2025579,000 
Total$4,535,631 
All outstanding liabilities before 2016, net of reinsurance
1,153 
Loss and allocated loss adjustment expense reserves, net of reinsurance$530,458 
__________ 
(1) The information for the years 2016 to 2024 is presented as unaudited supplemental information.

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Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance (Commercial Property Insurance)As of December 31, 2025
Total of Incurred But Not Reported Liabilities Plus Expected Development on Reported ClaimsCumulative Number of Reported Claims
Accident YearFor the Years Ended December 31,
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021(1)
2022(1)
2023(1)
2024(1)
2025
(Amounts in thousands)(Amounts in thousands)
2016$38,639 $41,827 $46,349 $45,665 $46,170 $55,746 $56,479 $53,687 $51,796 $51,842 $78 1
201746,410 50,378 53,829 55,288 57,658 59,800 64,645 63,207 62,763 178 1
201843,859 45,610 42,587 44,452 47,141 47,799 46,474 46,013 397 1
201945,574 42,756 43,167 46,845 51,677 51,721 50,520 1,362 1
202056,319 46,663 42,968 50,634 49,630 51,418 2,586 1
202158,413 55,863 73,289 78,371 83,073 12,713 1
202275,113 83,086 95,927 100,461 20,105 1
202380,150 82,778 89,598 28,558 1
202497,285 85,445 29,410 1
202593,070 61,874 —
Total$714,203 
__________ 
(1) The information for the years 2016 to 2024 is presented as unaudited supplemental information.

Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance (Commercial Property Insurance)
For the Years Ended December 31,
Accident Year
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021(1)
2022(1)
2023(1)
2024(1)
2025
(Amounts in thousands)
2016$18,243 $27,210 $35,426 $39,499 $41,221 $46,026 $48,036 $49,190 $50,579 $50,625 
201718,910 31,116 36,284 43,809 47,597 52,350 60,803 60,980 62,280 
201816,266 24,146 29,436 34,520 37,428 41,376 43,527 44,189 
201915,182 25,956 30,592 35,780 40,056 45,886 46,850 
202019,529 27,705 31,138 37,130 40,713 44,625 
202124,032 33,477 41,432 54,763 63,132 
202225,699 44,304 58,455 68,972 
202322,119 32,384 40,308 
202417,183 31,899 
202516,108 
Total$468,988 
All outstanding liabilities before 2016, net of reinsurance
63 
Loss and allocated loss adjustment expense reserves, net of reinsurance$245,278 
__________ 
(1) The information for the years 2016 to 2024 is presented as unaudited supplemental information.

The following is unaudited supplementary information about average historical claims duration as of December 31, 2025.

Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
Years12345678910
Private Passenger and Commercial Automobile insurance56.3 %20.1 %10.1 %6.0 %3.1 %1.5 %0.7 %0.3 %— %— %
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
Years12345678910
Homeowners insurance65.8 %23.5 %4.3 %2.5 %1.4 %1 %0.4 %0.2 %— %— %

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Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
Years12345678910
Commercial Property insurance28.5 %16.6 %10.5 %11.3 %6.9 %8.9 %6 %1.3 %2.4 %0.1 %

The reconciliation of the net incurred and paid claims development tables to the liability for claims and claim adjustment expenses in the consolidated balance sheet is as follows:

Reconciliation of the Disclosure of Incurred and Paid Claims Development
to the Loss and Loss Adjustment Expense Reserves
December 31, 2025
(Amounts in thousands)
Net outstanding liabilities
Private Passenger and Commercial Automobile insurance$2,476,270 
Homeowners insurance530,458 
Commercial Property insurance245,278 
Other short-duration insurance lines159,496 
Loss and loss adjustment expense reserves, net of reinsurance recoverables on unpaid losses3,411,502 
Reinsurance recoverables on unpaid losses
Private Passenger and Commercial Automobile insurance33,391 
Homeowners insurance— 
Commercial Property insurance42 
Other short-duration insurance lines603 
Total reinsurance recoverables on unpaid losses34,036 
Insurance lines other than short-duration998 
Unallocated claims adjustment expenses186,802 
187,800 
Total gross loss and loss adjustment expense reserves$3,633,338 

13. Dividends
The following table presents shareholder dividends paid:
Year Ended December 31,
202520242023
 (Amounts in thousands, except per share data)
Total paid$70,343 $70,326 $70,322 
Per share paid$1.2700 $1.2700 $1.2700 

The Insurance Companies are subject to the financial capacity guidelines established by their domiciliary states. The payment of dividends from statutory unassigned surplus of the Insurance Companies is restricted, subject to certain statutory limitations. As of December 31, 2025, the insurance subsidiaries of the Company are permitted to pay approximately $448 million in dividends in 2026 to Mercury General without the prior approval of the DOI of domiciliary states. The above statutory regulations may have the effect of indirectly limiting the ability of the Company to pay shareholder dividends. During 2025, 2024, and 2023, the Insurance Companies paid Mercury General ordinary dividends of $150 million, $100 million, and $0, respectively.

On February 13, 2026, the Board of Directors declared a $0.3175 quarterly dividend payable on March 26, 2026 to shareholders of record on March 12, 2026.

14. Statutory Balances and Accounting Practices

The Insurance Companies prepare their statutory-basis financial statements in conformity with accounting practices
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prescribed or permitted by the insurance departments of their domiciliary states. Prescribed statutory accounting practices primarily include those published as statements of statutory accounting principles by the National Association of Insurance Commissioners (the "NAIC"), as well as state laws, regulations, and general administrative rules. Permitted statutory accounting practices encompass all accounting practices not so prescribed. As of December 31, 2025, there were no material permitted statutory accounting practices utilized by the Insurance Companies.

The following table presents the statutory net income, and statutory capital and surplus of the Insurance Companies, as reported to regulatory authorities:
 Year Ended December 31,
 202520242023
 (Amounts in thousands)
Statutory net income (loss) (1)
$480,235 $446,405 $(35,590)
Statutory capital and surplus$2,392,286 $2,030,460 $1,667,187 
 __________
(1)Statutory net income (loss) reflects differences from GAAP net income (loss), including changes in the fair value of the investment portfolio as a result of the application of the fair value option.

The Insurance Companies must comply with minimum capital requirements under applicable state laws and regulations. The RBC formula is used by insurance regulators to monitor capital and surplus levels. It was designed to capture the widely varying elements of risks undertaken by writers of different lines of insurance business having differing risk characteristics, as well as writers of similar lines where differences in risk may be related to corporate structure, investment policies, reinsurance arrangements, and a number of other factors. The Company periodically monitors the RBC level of each of the Insurance Companies. As of December 31, 2025, 2024 and 2023, each of the Insurance Companies exceeded the minimum required RBC level, as determined by the NAIC and adopted by the state insurance regulators. None of the Insurance Companies’ RBC ratios were less than 350% of the authorized control level RBC as of December 31, 2025, 2024 and 2023. Generally, an RBC ratio of 200% or less would require some form of regulatory or company action.

15. Profit Sharing Plan and Annual Cash Bonuses
The Company’s employees are eligible to become members of the Profit Sharing Plan (the "Plan"). The Company, at the option of the Board of Directors, may make annual contributions to the Plan, and the contributions are not to exceed the greater of the Company’s net income for the plan year or its retained earnings at that date. In addition, the annual contributions may not exceed an amount equal to 15% of the compensation paid or accrued during the year to all participants under the Plan. No contributions were made in the past three years.

The Plan includes an option for employees to make salary deferrals under Section 401(k) of the Internal Revenue Code. Matching contributions, at a rate set by the Board of Directors, totaled approximately $13.0 million, $12.5 million, and $11.1 million for 2025, 2024, and 2023, respectively.

The Plan also includes an employee stock ownership plan that covers substantially all employees. The Board of Directors authorizes the Plan to purchase the Company’s common stock in the open market for allocation to the Plan participants. No purchases were made during the past three years.

The Company also provides company-wide annual cash bonuses to all eligible employees based on performance criteria for each recipient and for the Company as a whole. The Company performance goals are largely based on the Company's combined ratio. The Company paid a total of approximately $32.3 million, $7.1 million, and $3.6 million of company-wide annual cash bonuses to all its eligible employees based on these performance criteria in 2025, 2024, and 2023, respectively.

16. Share-Based Compensation

In February 2015, the Company adopted the 2015 Incentive Award Plan (the "2015 Plan"). A maximum of 4,900,000 shares of common stock were authorized for issuance under the 2015 Plan. No share-based compensation awards have been granted since March 2018 under the 2015 Plan, which expired in January 2025.

In February 2024, the Board adopted the 2024 Long-Term Incentive Plan (the “LTIP”) to provide certain key employees with the right to receive cash awards providing an opportunity to participate in the appreciation of the Company’s value and in order to retain these key employees and reward them for contributing to the success of the Company. Participants in the LTIP
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may be granted a number of notional interests, or phantom stock units ("PSUs"). Each PSU represents the right to receive payment of the value of a share of the Company’s common stock upon vesting. PSUs may be granted subject to vesting conditions, which may include service-based and/or performance-based vesting conditions tied to corporate and/or individual achievement objectives. An employee must remain employed through the date of payment of an award to be eligible for any payout under the LTIP. These PSUs are settled in cash upon vesting and accounted for as liability-based awards.

The following table presents a summary of cash received, compensation costs recognized and excess tax benefit, related to the Company's share-based awards:
Year Ended December 31,
202520242023
(Amounts in thousands)
Cash received from stock option exercises$— $752 $— 
Compensation cost, all share-based awards14,633 4,648 — 
Excess tax benefit, all share-based awards— (87)— 

Stock Option Awards

In February 2018, the Compensation Committee of the Company's Board of Directors awarded a total of 80,000 stock options to four senior executives under the 2015 Plan, which vested over the four-year requisite service period, except for 10,000 of these stock options that were forfeited. The fair values of these stock options were estimated on the date of grant using a closed-form option valuation model (Black-Scholes).

The following table provides the assumptions used in the calculation of grant-date fair values of these stock options based on the Black-Scholes option pricing model:
Weighted-average grant-date fair value$8.09 
Expected volatility33.18 %
Risk-free interest rate2.62 %
Expected dividend yield5.40 %
Expected term in months72

The aggregate intrinsic value of stock options exercised (the difference between the Company’s closing stock price and the stock option exercise price, multiplied by the number of in-the-money stock options) was $557,910 for 2024. There were no stock options exercised in 2025 and 2023. There were no stock options outstanding at December 31, 2025 and 2024.

Performance-based PSUs

The Company, at its discretion, grants a "target" number of performance-based PSUs to certain executive officers and other key employees of the Company. The payout value of the performance-based PSUs granted under the LTIP will be determined based on the achievement of specific, pre-established corporate performance objectives, and in part on individual performance, during the applicable three-year performance period (the "Performance Cycle"). The maximum payout level for the performance-based PSUs is 150% of the “target” award.
These performance-based PSUs vest at the end of the Performance Cycle beginning with the year of the grant, and then only if, and to the extent that, the Company’s performance during the Performance Cycle achieves the threshold established by the Compensation Committee of the Board. Each annual performance result is determined based on the average of the Company’s annual market share growth and its annual combined ratio. The vested number of performance-based PSUs for each grantee is based on the average of the Company's three annual performance results combined with the individual's performance during the Performance Cycle. The cash payout amount for each unit of the vested performance-based PSUs is equal to the average closing price per share of the Company’s common stock for the five calendar days preceding the determination of the final number of vested PSUs for each grantee at the end of the Performance Cycle for the 2024 grants, and the average closing price per share of the Company’s common stock for the 30 trading days following the Company’s public release of its financial results for the final calendar year in the Performance Cycle for the 2025 grants.

Liabilities for the expected cash payout and associated compensation expenses are recognized based on management’s
96

best estimate of the number of the performance-based PSUs expected to be vested resulting from the probable outcome of the performance-based vesting conditions, combined with the market price of the Company's common stock at the end of each reporting period. If the performance-based vesting conditions are not expected to be met for the Performance Cycle, no compensation cost will be recognized and any recognized compensation cost will be reversed.

The following table presents the summary of the performance-based PSU grants as of December 31, 2025:
Grant year20252024
Three-year performance period ending December 31, 20272026
Vesting shares, target (net of forfeited)166,842183,760
Vesting shares, maximum (net of forfeited)250,263275,640
The following table presents a summary of performance-based PSU awards activity, based on target vesting, during the years indicated:
Year Ended December 31,
20252024
 SharesWeighted-
Average  Fair
Value per Share		SharesWeighted-
Average  Fair
Value per Share
Outstanding at January 1197,516$66.48 —$— 
Granted171,714 45.77 200,532 39.12 
Vested— — — — 
Forfeited/Canceled(18,628)54.54 (3,016)59.80 
Expired— — — — 
Outstanding at December 31350,60290.33 197,51666.48 
Restricted PSUs

The Company, from time to time, grants restricted PSUs to certain key employees, typically to retain such key employees. The restricted PSUs vest in three equal annual installments on each of the first three anniversaries of the grant date. The payout value of the restricted PSUs granted under the LTIP will be determined based on the closing price per share of the Company's common stock at each vesting date. The vested amount of the restricted PSUs is paid at the end of each annual vesting period.

The following table presents a summary of restricted PSU awards activity during the years indicated:

Year Ended December 31,
20252024
 SharesWeighted-
Average  Fair
Value per Share		SharesWeighted-
Average  Fair
Value per Share
Outstanding at January 135,589$66.48 —$— 
Granted78,909 59.61 36,315 61.67 
Vested(13,084)75.96 — — 
Forfeited/Canceled(6,207)77.20 (726)62.98 
Expired— — — — 
Outstanding at December 3195,20794.06 35,58966.48 

The Company recorded share-based compensation expense of approximately $14.6 million and $4.6 million for the years ended December 31, 2025, and 2024, respectively, associated with the performance-based and restricted PSUs, which are mostly included in other operating expenses in its consolidated statements of operations. The Company recorded approximately $18.5 million and $4.6 million of accrued share-based compensation liability associated with the performance-based and restricted PSUs at December 31, 2025 and 2024, respectively, which are included in other liabilities in its consolidated balance sheets.

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17. Earnings (Loss) Per Share
The following table presents a reconciliation of the numerators and denominators of the basic and diluted earnings per share calculations:
Year Ended December 31,
 202520242023
 Net Income
(Numerator)		Weighted Average
Shares
(Denominator)		Per-Share
Amount		Net Income
(Numerator)		Weighted Average
Shares
(Denominator)		Per-Share
Amount		Net Income
(Numerator)		Weighted Average
Shares
(Denominator)		Per-Share
Amount
 (Amounts and numbers in thousands, except per-share data)
Basic EPS
Income available to common stockholders$541,094 55,389 $9.77 $467,953 55,373 $8.45 $96,336 55,371 $1.74 
Effect of dilutive securities:
Options— — — 4 — — 
Diluted EPS
Income available to common stockholders after assumed conversions$541,094 55,389 $9.77 $467,953 55,377 $8.45 $96,336 55,371 $1.74 

Potentially dilutive securities representing approximately 17,500 shares of common stock were excluded from the computation of diluted earnings per share for 2023, because their effect would have been anti-dilutive. There were no potentially dilutive securities with anti-dilutive effect for 2025 and 2024.

18. Commitments and Contingencies

Leases
The Company is obligated under various non-cancellable lease agreements providing for office space, automobiles, office equipment, and EDP equipment that expire at various dates through the year 2036. See Note 7. Leases for additional information on leases and future lease payments as of December 31, 2025.
California Earthquake Authority ("CEA")
The CEA is a quasi-governmental organization that was established to provide a market for earthquake coverage to California homeowners. The Company places all new and renewal earthquake coverage offered with its homeowners policies directly with the CEA. The Company receives a small fee for placing business with the CEA, which is recorded as other income in the consolidated statements of operations. Upon the occurrence of a major seismic event, the CEA has the ability to assess participating companies for losses. These assessments are made after CEA capital has been expended and are based upon each company’s participation percentage multiplied by the amount of the total assessment. Based upon the most recent information provided by the CEA, the Company’s maximum total exposure to CEA assessments at April 30, 2025, the most recent date at which information was available, was approximately $89.3 million. There were no assessments made in 2025.
Regulatory and Legal Matters

On September 10, 2021, the California DOI served the Company a Notice of Non-Compliance ("NNC"), alleging violations in connection with its 2014 Rating & Underwriting Examination Report, which was adopted by the California DOI in 2019. The NNC itemized alleged violations, many of which management believed were corrected or otherwise resolved during the course of the examination, and sought penalties. The Company participated in lengthy and detailed discussions with the California DOI after the adoption of the examination report, in an attempt to address the issues deemed unresolved by the California DOI, and took several additional corrective actions approved by the California DOI. On August 1, 2022, the California DOI publicly announced its intention to pursue an administrative action against the Company with respect to certain outstanding issues. The Company filed a written response to the NNC on September 29, 2022, along with written discovery requests. The response, consisting of a notice of defense, a motion to strike, and a motion to dismiss, challenged the NNC on procedural and substantive grounds. On November 9, 2022, the California DOI served objections and non-substantive responses to the Company's discovery requests. On November 14, 2023, the California DOI granted Consumer Watchdog's petition to intervene in the NNC, although the Company did not agree to allow its involvement in the mediation, which took place on March 4, 2024. The parties did not resolve the case at the mediation, but continued settlement discussions.
98


On February 24, 2025, the Company and the California DOI entered into a stipulated settlement agreement and consent order (the "Consent Order"), which resolved contested issues in the NNC. Pursuant to the Consent Order and without admitting liability, wrongdoing or violation of law with respect to the allegations contained in the NNC, the Company agreed to make the changes to its practices and procedures that were agreed to by both parties, including where appropriate (i) the refund of premium, (ii) modification of rating and underwriting rules, and (iii) development of new forms, practices and procedures. Under the Consent Order, the Company agreed to pay $5 million in refunds to its impacted policyholders by August 23, 2025. The Consent Order also provides for a contingent future penalty of $1.5 million that will be deemed void if the Company provides proof of timely refunds of the aforementioned $5 million and complies with the aforementioned changes to its practices and procedures as outlined in the Consent Order. All of the refunds have been issued, and the Company expects to fully comply with the terms of the Consent Order.

The Company is, from time to time, named as a defendant in various lawsuits or regulatory actions incidental to its insurance business. The majority of lawsuits brought against the Company relate to insurance claims that arise in the normal course of business and are reserved for through the reserving process. For a discussion of the Company’s reserving methods, see Note 1. Summary of Significant Accounting Policies.

The Company also establishes accruals for estimated liabilities for non-insurance claims related lawsuits, regulatory actions, and other contingencies when the Company believes a loss is probable and is able to estimate its potential exposure. For loss contingencies believed to be reasonably possible, the Company also discloses the nature of the loss contingency and an estimate of the possible loss, range of loss, or a statement that such an estimate cannot be made. In addition, the Company accrues for anticipated legal defense costs associated with such lawsuits and regulatory actions. While actual losses may differ from the amounts recorded and the ultimate outcome of the Company’s pending actions is generally not yet determinable, the Company does not believe that the ultimate resolution of currently pending legal or regulatory proceedings, either individually or in the aggregate, will have a material adverse effect on its financial condition or cash flows.

19. Segment Information

The Company is primarily engaged in writing personal automobile insurance and provides related property and casualty insurance products to its customers through 12 subsidiaries in 11 states, principally in California. The Company has one reportable business segment - the Property and Casualty business segment.
The Company’s Chief Operating Decision Maker ("CODM") consists of chairman of the board of directors and chief executive officer. The CODM reviews operating results based on pre-tax underwriting results which is calculated as net premiums earned less (a) losses and loss adjustment expenses and (b) underwriting expenses (policy acquisition costs and other operating expenses). The CODM evaluates operating results by line of insurance business that is further segregated by state to obtain a more disaggregated view of the Company’s operations. These operating results provide the CODM with significant information in making key operating decisions that include making price adjustments, hiring additional resources, and redeploying resources to a different line of insurance business or a different state. The lines of insurance business largely consist of private passenger automobile insurance, homeowners insurance, commercial automobile insurance, commercial property insurance, and automobile mechanical protection warranties.
The Company manages its business operations under one reportable business segment and one non-reportable business segment based on lines of insurance business. In identifying its reportable and non-reportable business segments, the Company considered the financial information provided to its CODM. After considering various factors, including the development and utilization of financial data provided to the CODM, the Company concluded that identifying its operating segments by line of insurance business was consistent with the objectives of ASC 280-10. Certain operating segments have been aggregated based on similar characteristics, including the nature of products and services provided, the method used to deliver those products and services, types of customers, and the nature of the regulatory environment, to arrive at the Company’s reportable business segment (Property and Casualty Lines) and its non-reportable business segment (Other Lines).
Expenses are allocated based on certain assumptions that are primarily related to premiums and losses. The Company’s net investment income, net realized investment gains (losses), other income, and interest expense are excluded in evaluating pre-tax underwriting profit. The Company does not allocate its assets, including investments, or income taxes in evaluating pre-tax underwriting profit.

Property and Casualty Lines

The Property and Casualty Lines business segment offers several insurance products to the Company’s individual
99

customers and small business customers. The major insurance products (lines of insurance business) are: private passenger automobile, which is the Company’s primary business, and related insurance products such as homeowners, commercial automobile and commercial property. These insurance products are primarily sold to the Company’s individual customers and small business customers, which increases retention of the Company’s private passenger automobile client base. The insurance products comprising the Property and Casualty business segment are sold through the same distribution channels, mainly through independent and 100% owned insurance agents, and go through a similar underwriting process.

Other Lines
The Other Lines business segment represents an operating segment that does not meet the quantitative thresholds required to be considered a reportable segment. This operating segment offers automobile mechanical protection warranties which are primarily sold through automobile dealerships and credit unions.
The following table presents operating results by reportable segment for the years ended:

Year Ended December 31,
202520242023
 Property & CasualtyOtherTotalProperty & CasualtyOtherTotalProperty & CasualtyOtherTotal
(Amounts in millions)
Net premiums earned$5,476.1 $29.5 $5,505.6 $5,046.1 $29.4 $5,075.5 $4,245.4 $29.0 $4,274.4 
Less:
Losses3,338.5 14.9 3,353.4 3,156.4 14.9 3,171.3 3,019.4 13.7 3,033.1 
Loss adjustment expenses607.6 2.0 609.6 511.3 1.9 513.2 482.8 2.0 484.8 
Losses and loss adjustment expenses3,946.1 16.9 3,963.0 3,667.7 16.8 3,684.5 3,502.2 15.7 3,517.9 
Policy acquisition costs929.7 13.2 942.9 846.6 11.7 858.3 696.9 11.6 708.5 
Other operating expenses391.2 3.1 394.3 324.1 3.1 327.2 276.6 3.1 279.7 
Underwriting gain (loss) 209.1 (3.7)205.4 207.7 (2.2)205.5 (230.3)(1.4)(231.7)
Investment income328.7 280.0 234.6 
Net realized investment gains131.4 88.7 101.0 
Other income26.7 31.5 19.7 
Interest expense(28.6)(30.8)(24.2)
Pre-tax income$663.6 $574.9 $99.4 
Net income$541.1 $468.0 $96.3 




















100

The following table presents the Company’s net premiums earned and direct premiums written by line of insurance business for the years ended:
Year Ended December 31,
 202520242023
 Property & CasualtyOtherTotalProperty & CasualtyOtherTotalProperty & CasualtyOtherTotal
(Amounts in millions)
Private passenger automobile$3,552.6 $— $3,552.6 $3,278.5 $— $3,278.5 $2,796.1 $— $2,796.1 
Homeowners1,260.9 — 1,260.9 1,168.7 — 1,168.7 957.7 — 957.7 
Commercial automobile384.4 — 384.4 378.2 — 378.2 303.9 — 303.9 
Other278.2 29.5 307.7 220.7 29.4 250.1 187.7 29.0 216.7 
Net premiums earned$5,476.1 $29.5 $5,505.6 $5,046.1 $29.4 $5,075.5 $4,245.4 $29.0 $4,274.4 
Private passenger automobile$3,591.2 $— $3,591.2 $3,395.8 $— $3,395.8 $2,841.8 $— $2,841.8 
Homeowners1,630.9 — 1,630.9 1,367.3 — 1,367.3 1,119.0 — 1,119.0 
Commercial automobile387.4 — 387.4 387.0 — 387.0 346.2 — 346.2 
Other345.5 27.5 373.0 324.2 26.5 350.7 224.9 26.6 251.5 
Direct premiums written$5,955.0 $27.5 $5,982.5 $5,474.3 $26.5 $5,500.8 $4,531.9 $26.6 $4,558.5 


















101

Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None

Item 9A.Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in the Company’s reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost benefit relationship of possible controls and procedures.
As required by Securities and Exchange Commission Rule 13a-15(b), the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based on the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level.
Management’s Report on Internal Control Over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2025. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013). Based upon its assessment, the Company’s management believes that, as of December 31, 2025, the Company’s internal control over financial reporting is effective based on these criteria.
KPMG LLP, the independent registered public accounting firm that audited the consolidated financial statements included in this 2025 Annual Report on Form 10-K, has issued an audit report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2025, which is included herein.
Changes in Internal Control over Financial Reporting
There has been no change in the Company’s internal control over financial reporting during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company’s process for evaluating controls and procedures is continuous and encompasses constant improvement of the design and effectiveness of established controls and procedures and the remediation of any deficiencies which may be identified during this process.

Item 9B.Other Information
Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements
During the three months ended December 31, 2025, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable
102

PART III
 
Item 10.Directors, Executive Officers, and Corporate Governance
Item 11.Executive Compensation
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.Certain Relationships and Related Transactions, and Director Independence
Item 14.Principal Accounting Fees and Services
Information regarding executive officers of the Company is included in Part I. For other information called for by Items 10, 11, 12, 13 and 14, reference is made to the Company’s definitive proxy statement for its Annual Meeting of Shareholders, which will be filed with the SEC within 120 days after December 31, 2025 and which is incorporated herein by reference.
103

PART IV
 
Item 15.Exhibits and Financial Statement Schedules

The following documents are filed as a part of this report:
1. Financial Statements: The Consolidated Financial Statements for the year ended December 31, 2025 are contained herein as listed in the Index to Consolidated Financial Statements on page 55.
2. Financial Statement Schedules:
Report of Independent Registered Public Accounting Firm
Schedule I—Summary of Investments—Other than Investments in Related Parties
Schedule II—Condensed Financial Information of Registrant
Schedule IV—Reinsurance

All other schedules are omitted as the required information is inapplicable or the information is presented in the Consolidated Financial Statements or Notes thereto.
3. Exhibits
 
Form 10-K Exhibit No.Description of ExhibitIf Incorporated by Reference, Documents with Which Exhibit was Previously Filed with the SEC
3.1
3.2
3.3
3.4
3.5
4.1Shareholders’ Agreement dated as of October 7, 1985 among the Company, George Joseph and Gloria Joseph.This document was filed as an exhibit to Registrant’s Registration Statement on Form S-1, File No. 33-899, and is incorporated herein by this reference. (Not available on the SEC website. Filed prior to the SEC Edgar filing mandate).
4.2
4.3
4.4
10.1*Filed herewith.
104

10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10Filed herewith.
10.11*
10.12*
10.13*
10.14
10.15
10.16
10.17
105

19.1
21.1Filed herewith.
23.1Filed herewith.
31.1Filed herewith.
31.2Filed herewith.
32.1Filed herewith.
32.2Filed herewith.
97.1
101.INSXBRL Instance Document-the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema Document.
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.
101.LABXBRL Taxonomy Extension Label Linkbase Document.
101.PREXBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
*Denotes management contract or compensatory plan or arrangement.

Item 16. Form 10-K Summary

None
106

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
MERCURY GENERAL CORPORATION
BY
/S/    GABRIEL TIRADOR
Gabriel Tirador
Chief Executive Officer
February 17, 2026

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SignatureTitle Date
/S/    GEORGE JOSEPH       
George Joseph
Chairman of the Board February 17, 2026
/S/    GABRIEL TIRADOR         
Gabriel Tirador
Chief Executive Officer and Director (Principal Executive Officer) February 17, 2026
/S/    VICTOR G. JOSEPH
Victor G. Joseph
President and Chief Operating Officer and DirectorFebruary 17, 2026
/S/    THEODORE R. STALICK  Theodore R. Stalick
Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) February 17, 2026
/S/    GEORGE G. BRAUNEGG  
George G. Braunegg
Director February 17, 2026
/S/    RAMONA L. CAPPELLO  
Ramona L. Cappello
Director February 17, 2026
/S/    JAMES G. ELLIS
James G. Ellis
DirectorFebruary 17, 2026
/S/    VICKY WAI YEE JOSEPH
Vicky Wai Yee Joseph
DirectorFebruary 17, 2026
/S/    JOSHUA E. LITTLE
Joshua E. Little
Director February 17, 2026
/S/    MARTHA E. MARCON
Martha E. Marcon
Director February 17, 2026
107

SCHEDULE I
 
MERCURY GENERAL CORPORATION AND SUBSIDIARIES
SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 2025
Type of InvestmentCostFair ValueAmounts in the
Balance Sheet
 (Amounts in thousands)
Fixed maturity securities:
U.S. government bonds$21,436 $21,546 $21,546 
Municipal securities3,533,295 3,538,473 3,538,473 
Mortgage-backed securities303,314 297,381 297,381 
Corporate securities747,723 751,602 751,602 
Collateralized loan obligations733,034 722,794 722,794 
Other asset-backed securities110,924 98,455 98,455 
Total fixed maturity securities5,449,726 5,430,251 5,430,251 
Equity securities:
Common stock557,738 679,594 679,594 
Non-redeemable preferred stock52,206 38,761 38,761 
Private equity funds measured at net asset value (1)
118,516 94,432 94,432 
Total equity securities728,460 812,787 812,787 
Short-term investments336,978 336,992 336,992 
Total investments$6,515,164 $6,580,030 $6,580,030 
__________ 
(1)The fair value is measured using the NAV practical expedient. See Note 4. Fair Value Measurements of the Notes to Consolidated Financial Statements for additional information.


See accompanying Report of Independent Registered Public Accounting Firm


S-1

SCHEDULE I, Continued

MERCURY GENERAL CORPORATION AND SUBSIDIARIES
SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 2024
Type of InvestmentCostFair ValueAmounts in the
Balance Sheet
 (Amounts in thousands)
Fixed maturity securities:
U.S. government bonds $94,102 $93,837 $93,837 
Municipal securities3,018,428 2,987,054 2,987,054 
Mortgage-backed securities271,444 259,421 259,421 
Corporate securities863,323 841,715 841,715 
Collateralized loan obligations623,817 626,255 626,255 
Other asset-backed securities111,344 105,096 105,096 
Total fixed maturity securities4,982,458 4,913,378 4,913,378 
Equity securities:
Common stock634,821 741,369 741,369 
Non-redeemable preferred stock52,206 42,603 42,603 
Private equity funds measured at net asset value (1)
108,041 95,203 95,203 
Total equity securities795,068 879,175 879,175 
Short-term investments283,792 283,817 283,817 
Total investments$6,061,318 $6,076,370 $6,076,370 
__________ 
(1)The fair value is measured using the NAV practical expedient. See Note 4. Fair Value Measurements of the Notes to Consolidated Financial Statements for additional information.


See accompanying Report of Independent Registered Public Accounting Firm


S-2

SCHEDULE II

MERCURY GENERAL CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
 December 31,
 20252024
 (Amounts in thousands)
ASSETS
Investments, at fair value:
Equity securities (cost $17,551; $17,551)
$36,393 $29,387 
Short-term investments (cost $82; $78)
82 78 
Investment in subsidiaries2,886,667 2,476,777 
Total investments2,923,142 2,506,242 
Cash77,416 19,316 
Accrued investment income12 12 
Amounts receivable from affiliates432 17,037 
Income tax receivable from affiliates46,046 30,859 
Other assets1,037 1,233 
Total assets$3,048,085 $2,574,699 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Notes payable$574,527 $574,128 
Accounts payable and accrued expenses381 — 
Amounts payable to affiliates— 14,274 
Income tax payable to affiliates15,634 9,874 
Current income taxes28,875 19,195 
Deferred income taxes5,948 4,837 
Other liabilities5,445 5,867 
Total liabilities630,810 628,175 
Commitments and contingencies
Shareholders’ equity:
Common stock99,699 99,699 
Retained earnings2,317,576 1,846,825 
Total shareholders’ equity2,417,275 1,946,524 
Total liabilities and shareholders’ equity$3,048,085 $2,574,699 
 

















See accompanying notes to condensed financial information.
See accompanying Report of Independent Registered Public Accounting Firm


S-3


SCHEDULE II, Continued

MERCURY GENERAL CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF OPERATIONS
 Year Ended December 31,
 202520242023
 (Amounts in thousands)
Revenues:
Net investment income$2,116 $2,187 $2,998 
Net realized investment gains7,056 3,046 1,431 
Total revenues9,172 5,233 4,429 
Expenses:
Other operating expenses2,758 2,535 2,526 
Interest28,582 30,697 24,129 
Total expenses31,340 33,232 26,655 
Loss before income taxes and equity in net income of subsidiaries(22,168)(27,999)(22,226)
Income tax benefit(3,372)(3,386)(4,379)
Loss before equity in net income of subsidiaries(18,796)(24,613)(17,847)
Equity in net income of subsidiaries559,890 492,566 114,183 
Net income$541,094 $467,953 $96,336 





















See accompanying notes to condensed financial information.
See accompanying Report of Independent Registered Public Accounting Firm


S-4


SCHEDULE II, Continued

MERCURY GENERAL CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
 Year Ended December 31,
 202520242023
 (Amounts in thousands)
Cash flows from operating activities:
Net cash used in by operating activities$(21,562)$(28,137)$(14,703)
Cash flows from investing activities:
Capital contribution to subsidiaries— (165)(150,000)
Distributions received from special purpose entities— 300 6,210 
Dividends received from subsidiaries150,000 100,000 — 
Fixed maturity securities available for sale in nature
Sales— 5,000 — 
Calls or maturities— 5,000 955 
Equity securities available for sale in nature
Purchases— (2,399)(1,172)
Sales— 4,057 25,848 
(Increase) decrease in short-term investments(4)493 26,481 
Other, net9 43 183 
Net cash provided by (used in) investing activities150,005 112,329 (91,495)
Cash flows from financing activities:
Dividends paid to shareholders(70,343)(70,326)(70,322)
Proceeds from stock options exercised— 752 — 
Proceeds from bank loan— — 175,000 
Net cash (used in) provided by financing activities(70,343)(69,574)104,678 
Net increase (decrease) in cash58,100 14,618 (1,520)
Cash:
Beginning of year19,316 4,698 6,218 
End of year$77,416 $19,316 $4,698 
SUPPLEMENTAL CASH FLOW DISCLOSURE
Interest paid $28,121 $30,009 $22,959 
Income taxes (refunded) paid, net
U.S. federal$(35,616)$(10,865)$1,591 
U.S. state and local
    California294 3,616 16 
    Other277 174 23 
571 3,790 39 
Foreign— — — 
             Total income taxes (refunded) paid, net$(35,045)$(7,075)$1,630 
 



See accompanying notes to condensed financial information.
See accompanying Report of Independent Registered Public Accounting Firm


S-5


MERCURY GENERAL CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO CONDENSED FINANCIAL INFORMATION

The accompanying condensed financial information should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included in this report.
Distributions received from Special Purpose Investment Vehicles

From time to time, the Company forms special purpose investment vehicles to facilitate its investment activities involving derivative instruments such as total return swaps, or limited partnerships such as private equity funds. At December 31, 2025, the Company had three such special purpose investment vehicles: Fannette Funding LLC, Animas Funding LLC, and Upper Animas Holdings LLC. These special purpose investment vehicles are consolidated into the Company. Creditors have no recourse against the Company in the event of default by these special purpose investment vehicles. The Company had no implied or unfunded commitments to these entities at December 31, 2025 and 2024. The Company's financial or other support provided to these entities and its loss exposure are limited to its collateral and original investment. Mercury General received distributions of $0.0 million, $0.3 million, and $6.2 million in 2025, 2024, and 2023, respectively, from these special purpose investment vehicles.
Dividends received from Subsidiaries

Dividends of $150 million, $100 million and $0 were received by Mercury General from its 100% owned insurance subsidiaries in 2025, 2024 and 2023, respectively, and were recorded as a reduction to investment in subsidiaries.
Capitalization of Insurance Subsidiaries

Mercury General made capital contributions to its insurance subsidiaries of $0, $0.2 million and $150.0 million in 2025, 2024 and 2023, respectively. Mercury General did not receive any capital distribution from its insurance subsidiaries in 2025, 2024 and 2023.
Notes Payable

On March 8, 2017, Mercury General completed a public debt offering issuing $375 million of senior notes. The notes are unsecured senior obligations of Mercury General, with a 4.4% annual coupon payable on March 15 and September 15 of each year commencing September 15, 2017. These notes mature on March 15, 2027. The Company used the proceeds from the notes to pay off amounts outstanding under the existing loan and credit facilities and for general corporate purposes. Mercury General incurred debt issuance costs of approximately $3.4 million, inclusive of underwriters' fees. The notes were issued at a slight discount of 99.847% of par, resulting in the effective annualized interest rate, including debt issuance costs, of approximately 4.45%.

On March 31, 2021, the Company entered into an unsecured $75 million five-year revolving credit facility. On November 18, 2022, the Company entered into the First Amendment to this credit facility. The First Amendment extended the maturity date of the loan to November 16, 2026 from March 31, 2026 with possible further extension if certain conditions are met, increased the aggregate commitments by all the lenders to $200 million from $75 million, and replaced the LIBOR with the term SOFR. On November 30, 2023, the Company entered into the Second Amendment to this credit facility, which further increased the aggregate commitments by all the lenders to $250 million from $200 million. On November 22, 2024, the Company entered into the Third Amendment to this credit facility, which extended and fixed the maturity date of the loan to November 18, 2027. The interest rates on borrowings under the credit facility are based on the Company's debt to total capital ratio and range from Term SOFR plus 112.5 basis points when the ratio is under 20% to Term SOFR plus 150.0 basis points when the ratio is greater than or equal to 30%. Commitment fees for the undrawn portions of the credit facility range from 12.5 basis points when the ratio is under 20% to 22.5 basis points when the ratio is greater than or equal to 30%. The debt to total capital ratio is expressed as a percentage of (a) consolidated debt to (b) consolidated shareholders' equity plus consolidated debt. The Company's debt to total capital ratio was 19.2% at December 31, 2025, resulting in a 12.5 basis point commitment fee on any undrawn portion of the credit facility. As of February 17, 2026, a total of $200 million was drawn under this facility on a three-month revolving basis at an annual interest rate of approximately 5.09%, with $50 million available to be drawn. The Company contributed $150 million of the total amount drawn to the surplus of its consolidated insurance subsidiaries in 2023, and used the remainder for general corporate purposes.
See accompanying Report of Independent Registered Public Accounting Firm
S-6

Federal Income Taxes

The Company files a consolidated federal income tax return for the following entities:
 
Mercury Casualty CompanyMercury Select Management Company, Inc.
Mercury Insurance CompanyMercury Insurance Services LLC
California Automobile Insurance CompanyAIS Management LLC
California General Underwriters Insurance Company, Inc.Auto Insurance Specialists LLC
Mercury Insurance Company of IllinoisPoliSeek AIS Insurance Solutions, Inc.
Mercury Insurance Company of GeorgiaAnimas Funding LLC
Mercury Indemnity Company of GeorgiaFannette Funding LLC
American Mercury Insurance CompanyMercury Plus Insurance Services LLC
Mercury Insurance Company of TexasMercury Information Technology Services LLC
Orion Indemnity CompanyUpper Animas Holdings LLC
Mercury County Mutual Insurance Company
Mercury Indemnity Company of America

The method of allocation between the companies is subject to an agreement approved by the Board of Directors. Allocation is based upon separate return calculations with current credit for net losses incurred by the insurance subsidiaries to the extent it can be used in the current consolidated return.




























See accompanying Report of Independent Registered Public Accounting Firm
S-7

SCHEDULE IV
MERCURY GENERAL CORPORATION AND SUBSIDIARIES
REINSURANCE
THREE YEARS ENDED DECEMBER 31,
Property and Liability Insurance Earned Premiums
202520242023
 (Amounts in thousands)
Direct amounts$5,766,498 $5,196,699 $4,368,342 
Ceded to other companies(287,032)(136,698)(109,445)
Assumed26,147 15,455 15,481 
Net amounts$5,505,613 $5,075,456 $4,274,378 
 
See accompanying Report of Independent Registered Public Accounting Firm
S-8

Exhibit 10.1









MERCURY GENERAL
CORPORATION
PROFIT SHARING PLAN
(Effective as of January 1, 2025)


































MERCURY GENERAL CORPORATION
PROFIT SHARING PLAN

Table of Contents
Page
RECITALS..................................................................................................................................... 4

ARTICLE I DESIGNATION OF PLAN AND DEFINITIONS.................................................... 5
1.01.... Title........................................................................................................................ 5
1.02.... Definitions..........................................................................................................…5

ARTICLE II PARTICIPATION...................................................................................................21
2.01.... Eligibility for Tax-Deferred Contributions and Matching Contributions.... 21
2.02.... Eligibility for Profit Sharing Contributions.................................................... 21
2.03.... Participation....................................................................................................... 21
2.04.... Restricted Participation..................................................................................... 21
2.05.... Participation After Normal Retirement Age.................................................... 21
2.06.... Participation Upon Reemployment.................................................................. 22
2.07.... Beneficiary Designation..................................................................................... 22

ARTICLE III CONTRIBUTIONS............................................................................................... 25
3.01.... Matching Contributions.................................................................................... 25
3.02.... Profit Sharing Contributions............................................................................ 26
3.03.... Tax-Deferred Contributions.............................................................................. 26
3.04.... Automatic Enrollment Contributions.............................................................. 27
3.05.... Voluntary Contributions.................................................................................... 28
3.06.... Tax-Deferred Rollover Contributions and Roth Rollover Contributions..... 29
3.07.... Transfers From Other Qualified Plans............................................................. 29
3.08.... Tax-Deferred Rollover Contributions Account and Roth Rollover Contributions Account........................................................................................30
3.09.... Nondiscrimination Testing................................................................................. 30
3.10.... Excess Deferrals, Excess Contributions and Excess Aggregate
Contributions ......................................................................................................38
3.11.... Correction Through Qualified Nonelective Contributions............................. 45
3.12.... Duties of Funding Agent Regarding Contributions........................................ 46
3.13.... Investment Options and Designations.............................................................. 46
3.14.... Participant Accounts.......................................................................................... 50
3.15.... In-Plan Roth Transfers...................................................................................... 50
3.16.... Leveraged ESOP Provisions.............................................................................. 51
3.17.... Release of Stock From Loan Suspense Account.............................................. 52
3.18.... Dividends on Company Stock........................................................................... 54

ARTICLE IV MAXIMUM CONTRIBUTIONS AND BENEFIT LIMITATIONS.................... 57
4.01.... Limitation on Annual Additions........................................................................ 57
4.02.... Excess Annual Additions.................................................................................... 57
4.03.... “Annual Additions” Defined............................................................................. 57
4.04.... Aggregation and Disaggregation of Plans........................................................ 59

ARTICLE V TOP HEAVY PROVISIONS.................................................................................. 61
5.01.... Top Heavy Provisions......................................................................................... 61



ARTICLE VI VESTING.............................................................................................................. 65
6.01.... Vesting................................................................................................................. 65
6.02.... Forfeitures........................................................................................................... 66

ARTICLE VII DISTRIBUTIONS................................................................................................ 67
7.01.... Spousal Consent.................................................................................................. 67
7.02.... Age 59 ½ In-Service Withdrawals..................................................................... 67
7.03.... Hardship Distribution........................................................................................ 68
7.04.... Loans................................................................................................................... 70
7.05.... Benefits Upon Severance From Employment.................................................. 70
7.06.... Forms of Payment.............................................................................................. 71
7.07.... Required Minimum Distributions.................................................................... 72
7.08.... Involuntary Cash-Out of Vested Regular Account.......................................... 79
7.09.... Voluntary Cash-Out of Vested Regular Account.............................................79
7.10.... Direct Rollover.................................................................................................... 79
7.11.... Qualified Reservist Distribution....................................................................... 83
7.12.... Qualified Military Service................................................................................. 83
7.13.... Qualified Domestic Relations Orders............................................................... 84
7.14.... Persons under Legal or Other Disability.......................................................... 85
7.15.... Missing Participants or Beneficiaries............................................................... 85
7.16.... Qualified Birth or Adoption Distributions....................................................... 85
7.17.... Emergency Personal Expense Distribution...................................................... 86
7.18.... Qualified Disaster Recovery Distribution........................................................ 86
7.19.... Domestic Abuse Victim Distributions............................................................... 87
7.20.... Terminal Illness Distributions........................................................................... 87
7.21.... Return of Certain Distributions as Rollover.................................................... 88
7.22.... Former ESOP Account Put Option................................................................... 88

ARTICLE VIII THE COMMITTEE............................................................................................ 90
8.01.... Committee........................................................................................................... 90
8.02.... Funding Policy and Method.............................................................................. 91
8.03.... Transmittal of Information................................................................................ 92
8.04.... Indemnification................................................................................................... 92
8.05.... Determinations and Corrections....................................................................... 93
8.06.... Relationship of Fiduciaries................................................................................ 93
8.07.... Discharge of Duties by Fiduciaries................................................................... 94
8.08.... Multiple Fiduciary Capacities........................................................................... 95

ARTICLE IX AMENDMENT AND TERMINATION............................................................... 96
9.01.... Amendment......................................................................................................... 96
9.02.... Retroactive Amendments................................................................................... 96
9.03.... Discontinuance or Termination of Plan............................................................ 97
9.04.... Partial Termination of Plan............................................................................... 98
9.05.... Failure to Contribute......................................................................................... 98
9.06.... Merger and Consolidation of Plan.................................................................... 98
9.07.... Substitution of Successor Employer................................................................. 98
9.08.... Distribution Upon Sale....................................................................................... 98
9.09.... Plan Termination Distribution Availability..................................................... 99

ARTICLE X MISCELLANEOUS............................................................................................. 100
10.01.. Contributions Not Recoverable....................................................................... 100
10.02.. Employment Rights.......................................................................................... 101


10.03.. Receipt or Release............................................................................................ 101
10.04.. Alienation.......................................................................................................... 101
10.05.. Controlling Law................................................................................................ 102
10.06.. Text Prevails over Captions............................................................................. 102
10.07.. Counterparts..................................................................................................... 102
10.08.. Successors and Assigns..................................................................................... 102
10.09.. Electronic Retention of Documents................................................................ 102
10.10.. Claims for Benefits and Notice of Right to Defer.......................................... 102
10.11.. Appeals Procedure........................................................................................... 104
10.12.. Arbitration of Claims....................................................................................... 108

ARTICLE XI PARTICIPATING EMPLOYERS...................................................................... 114
11.01.. Adoption by Affiliated or Non-Affiliated Employers.................................... 114
11.02.. Requirements of Participating Employers..................................................... 114
11.03.. Designation of the Employer as Agent............................................................ 115
11.04.. Employee Transfers.......................................................................................... 115
11.05.. Participating Employer Contributions........................................................... 115
11.06.. Amendment....................................................................................................... 115
11.07.. Participating Employer Discontinuance......................................................... 115
11.08.. Committee Authority........................................................................................ 115
11.09.. Compliance Testing.......................................................................................... 116

APPENDIX A PARTICIPATING EMPLOYERS......................................................................117































MERCURY GENERAL CORPORATION
PROFIT SHARING PLAN

This Plan is made and entered into by Mercury General Corporation (“Mercury”, “Company” or “Employer”), a corporation organized and existing under the laws of the State of California, with its principal place of business located in Los Angeles, California.

RECITALS

WHEREAS, the Mercury General Corporation Profit Sharing Plan (the “Plan”) was originally adopted as the California General Underwriters Profit Sharing Plan, effective September 30, 1963, and has since been amended from time to time; and

WHEREAS, it is desirable to amend and restate the Plan in connection with changes requested by the Internal Revenue Service, and to incorporate amendments to the Plan since it was last amended and restated.

NOW, THEREFORE, the Plan is hereby amended and restated as set forth herein effective as of January 1, 2025, except as provided otherwise herein.

The Plan’s ESOP feature includes a stock bonus plan and an employee stock ownership plan intended to qualify under Sections 401(a) and 4975(e)(7) of the Internal Revenue Code, and as such is intended to be invested primarily in stock of the Company over the lifetime of the plan. The Plan’s ESOP feature was frozen to new participants and new investments as of January 1, 2011.
This Plan is also intended to constitute an accident and health plan so that amounts distributed on account of disability are excluded from income under Section 105(c) of the Internal Revenue Code.


























ARTICLE I
DESIGNATION OF PLAN AND DEFINITIONS

1.01    Title.    This Plan is intended to be a profit sharing plan and shall be known as the “Mercury General Corporation Profit Sharing Plan.” Contributions may be made to this Plan without regard to the current or accumulated profits of the Company.

1.02     Definitions. Whenever used herein, the following terms shall have the meanings set forth below, unless a different meaning is clearly required by the context:

(a)    “Accounts” shall mean the aggregate of a Participant’s Regular Account,      Tax-Deferred Contributions Account, Roth Contributions Account and, if any, Voluntary Contributions Account, Tax-Deferred Rollover Contributions Account, Roth Rollover Contributions Account, Former ESOP Account, and In-Plan Roth Conversion Account.

(b)     “Acquired Employer” shall mean an employer acquired by the Company; provided, however, that if an Acquired Employer ceases to be an Affiliated Employer, then such an employer shall no longer be considered an Acquired Employer for purposes of Section 1.02(r) and Section 6.01(d) with respect to any period of employment on or after the date the entity ceases to be an Affiliated Employer.

(c)    “Acquisition Loan” shall mean the definition provided under Section 3.16(a) of the Plan.

(d)     “Affiliated Employer” shall mean the Employer and any corporation which is a member of a controlled group of corporations (as defined in Code Section 414(b)) which includes the Employer; any trade or business (whether or not incorporated) which is under common control (as defined in Code Section 414(c)) with the Employer; any organization (whether or not incorporated) which is a member of an affiliated service group (as defined in Code Section 414(m)) which includes the Employer; any “leasing organization” (as defined in Code Section 414(n)) to the extent its employees constitute “leased employees” (within the meaning of Code Section 414(n)) with respect to a Participating Employer; and any other entity required to be aggregated with the Employer pursuant to regulations under Code Section 414(o).

(e)    “Allocated Dividends” shall mean the definition provided under Section 3.17(e) of the Plan.

(f)    “Annual Addition” shall mean in the case of any Employee, when such term is used with respect to the Plan, the definition provided under Section 4.03 of the Plan.

(g)    “Beneficiary” or “Beneficiaries” shall mean the person or persons last designated by (i) a Participant, in accordance with Section 2.07, to receive the benefits specified hereunder in the event of the Participant’s death or (ii) the terms of the Plan.




(h)    “Board of Directors” or “Board” shall mean the Board of Directors of the Employer or its successor in interest resulting from merger, consolidation or transfer of substantially all assets, which expressly agrees in writing to continue the Plan as its own.

(i)    “Break in Service” or “One-Year Break in Service” means a Plan Year during which an Employee has not completed an aggregate of more than five hundred (500) Hours of Service, including, for this purpose only, such hours as may be credited during a leave of absence approved in accordance with Company policies pursuant to nondiscriminatory rules applicable to similarly situated Employees, provided that the Employee returns from his or her leave of absence to the service of the Employer within thirty (30) days after his or her termination of such leave of absence, plus such hours as may be required to be credited to the account of an Employee under those federal laws applicable to Employees in the Armed Services under conscription or in time of war and any similar Federal laws, provided that the Employee returns to the Service of the Employer within the minimum time specified by such laws. Leaves of absence shall also be granted in accordance with the requirements of The Family and Medical Leave Act of 1993. Accordingly, an Eligible Employee with more than one year of continuous service, during which the Employee worked at least one thousand two hundred fifty (1,250) hours, may take up to a total of twelve (12) weeks in a twelve (12)-month period for unpaid family care leave. An Employee taking family care leave shall be required to substitute for family care leave, any of the Employee’s accrued vacation leave or other accrued time off during this period or any other paid or unpaid time off negotiated with the Employer.

(j)    “Code” shall mean the Internal Revenue Code of 1986, as amended. Reference to a section of the Code shall include that section and any comparable section or sections of any future legislation that amends, supplements, or supersedes such section.

(k)    “Code Section 415 Compensation” shall mean “Compensation,” as defined under Section 1.02(n), adjusted for the following:

(i)    Code Section 415 Compensation shall be adjusted, as set forth herein, for the following types of Compensation paid after a Participant's severance from employment with the Employer maintaining the Plan (or any other entity that is treated as the Employer pursuant to Code Section 414(b), (c), (m) or (o)). However, amounts described in subsections (A) and (B) below may only be included in Code Section 415 Compensation to the extent such amounts are paid by the later of two and one-half (2½) months after severance from employment or by the end of the limitation year that includes the date of such severance from employment. Any other payment of compensation paid on or after severance of employment, and any severance payments made prior to severance of employment, that is not described in the following types of Compensation is not considered Code Section 415 Compensation within the meaning of Code Section 415(c)(3), even if payment is made by the later of two and one-half (2½) months


after severance from employment or by the end of the limitation year that includes the date of such severance from employment.

(A)    Code Section 415 Compensation shall include regular pay after severance of employment if:

(1)    The payment is regular compensation for services during the Participant's regular working hours, or compensation for services outside the Participant's regular working hours (such as overtime or shift differential), commissions, bonuses, or other similar payments; and

(2)     The payment would have been paid to the Participant prior to a severance from employment if the Participant had continued in employment with the Employer.

(B)     Leave cash outs shall be included in Code Section 415 Compensation, if those amounts would have been included in the definition of Code Section 415 Compensation if they were paid prior to the Participant's severance from employment, and the amounts are payment for unused accrued bona fide sick, vacation, or other leave, but only if the Participant would have been able to use the leave if employment had continued. In addition, deferred compensation shall be included in Code Section 415 Compensation, if the Compensation would have been included in the definition of Code Section 415 Compensation if it had been paid prior to the Participant's severance from employment, and the Compensation is received pursuant to a nonqualified unfunded deferred compensation plan, but only if the payment would have been paid at the same time if the Participant had continued in employment with the Employer and only to the extent that the payment is includible in the Participant's gross income.

(ii)    With respect to a Participant who is permanently and totally disabled (as defined in Code Section 22(e)(3), Section 415 Compensation does not include compensation that the Participant would have received for the year if the Participant was paid at the rate of compensation paid immediately before becoming permanently and totally disabled.

Participants may not make Tax-Deferred Contributions and/or Roth Contributions with respect to amounts that are not Code Section 415 Compensation. However, for this purpose, Code Section 415 Compensation is not limited to the Annual Compensation limit of Code Section 401(a)(17).

(l)    “Committee” shall mean the Mercury General Corporation Retirement Plan Committee.



(m)    “Company Stock” shall mean shares of common stock of Mercury General Corporation, which shares constitute “Employer Securities” under Code Section 409(l).

(n)    “Compensation” shall mean all compensation paid to, or accrued on behalf of, an Employee by an Employer during the Plan Year and reportable on Form W-2 together with any amounts contributed to a plan qualifying under Code Section 401(k) as salary reduction contributions or to a cafeteria plan under Code Section 125 or paid as a qualified transportation fringe under Code Section 132(f)(4), and excluding all reimbursements or other expense allowances, other fringe benefits (cash and noncash), moving expenses, deferred compensation and welfare benefits, and all compensation paid or includible following a Break in Employment. Compensation shall also include any payment made by the Employer to an Employee who is performing active military service that represents all or some of the wages that the Employee would have received from the Employer if the Employee were still actively employed. Compensation with respect to any Employee shall exclude Annual Compensation of each Participant that exceeds $360,000 (for 2026), as adjusted for cost-of-living increases in accordance with Code Section 401(a)(17)(B).

“Annual Compensation” means Compensation during the Plan Year or such other consecutive 12-month period over which Compensation is otherwise determined under the Plan (the determination period). The cost-of-living adjustment in effect for a calendar year applies to Annual Compensation for the determination period that begins with or within such calendar year. For purposes of the Code Section 401(a)(17) limitations, if the Plan is a plan described in Code Section 413(c), this limitation applies separately with respect to the Compensation of any Participant from each Employer maintaining the Plan. All Employers who are Affiliated Employers are considered to be the same Employer for this rule.

Notwithstanding the above provisions to the contrary, Compensation for a Plan Year shall not include amounts earned but not paid during the limitation year solely because of the timing of pay periods and pay dates. However, Compensation for a Plan Year shall include amounts earned but not paid during the Plan Year solely because of the timing of pay periods and pay dates, provided the amounts are paid during the first few weeks of the next Plan Year, the amounts are included on a uniform and consistent basis with respect to all similarly situated Participants, and no Compensation is included in more than one Plan Year.

If the Plan is a Code Section 413(c) plan, benefits, contributions and Compensation received by a Participant from any of the Employers maintaining this Plan will be combined for purposes of this section.

(o)    “Effective Date” shall be September 30, 1963. The “Amended Effective Date” of this current restatement shall be January 1, 2025, except as otherwise specifically provided.

(p)    “Eligible Employee” shall mean any Employee of the Employer, who has met the eligibility criteria in Section 2.01 and 2.02 of the Plan and is not:


(i)    Any Leased Employee;

(ii)    Any Employee who is a member of a collective bargaining unit and is covered by a collective bargaining agreement, which agreement does not specifically provide for coverage of such Employee under the Plan, provided that retirement benefits were the subject of good faith bargaining between Employee representatives and the Employer, unless the Employee is a member of a group of employees to whom this Plan has been extended by such a collective bargaining agreement; and

(iii)    Any Employee who is a nonresident alien to the United States and who has no earned income from sources within the United States.

For purposes of this definition of “Eligible Employee”, and notwithstanding any other provisions of the Plan to the contrary, individuals who are not classified by the Employer, in its discretion, as employees under Code Section 3121(d) (including, but not limited to, individuals classified by the Employer as independent contractors and non-employee consultants) and individuals who are classified by the Employer, in its discretion, as employees of any entity other than the Employer or an Affiliated or Non-Affiliated Employer do not meet the definition of Eligible Employee and are ineligible for benefits under this Plan, even if the classification by the Employer is determined to be erroneous, or is retroactively revised. In the event the classification of an individual who is excluded from the definition of Eligible Employee under the preceding sentence is determined to be erroneous or is retroactively revised, the individual shall nonetheless continue to be excluded from the definition of Eligible Employee and shall be ineligible for benefits for all periods prior to the date the Employer determines its classification of the individual is erroneous or should be revised. The foregoing sets forth a clarification of the intention of the Employer regarding participation in this Plan for any Plan Year, including Plan Years prior to the adoption of any amendment or restatement of this Plan. Furthermore, in determining whether an individual is an Employee for purposes of eligibility to participate in the Plan, the individual shall be classified as an Employee with respect to a period of time only if the Employer has initially treated the individual as an Employee for payroll tax purposes for such period of time, even if such classification is later changed as a result of regulatory action, civil litigation or the threat of either.

(q)    “Employee” or “Associate” shall mean a person employed by the Employer, an Affiliated Employer, or a Non-Affiliated Employer, any portion of whose income is subject to withholding of income tax and/or for whom Social Security contributions are made by the Employer, an Affiliated Employer, or a Non-Affiliated Employer, as well as any other person qualifying as a common-law Employee of the Employer, an Affiliated Employer, or Non-Affiliated Employer. Employee shall include any Leased Employee within the meaning of Code Section 414(n)(2).

For purposes of this Section 1.02(q), the term “Leased Employee” shall mean any person (other than an Employee of the Employer) who pursuant


to an agreement between the Employer and any other person (“leasing organization”) has performed services for the Employer (or for the Employer and related persons determined in accordance with Code Section 414(n)(6)) on a substantially full-time basis for a period of at least one (1) year, and such services are performed under the primary direction or control of the Employer. Contributions or benefits provided to a Leased Employee by the leasing organization which are attributable to services performed for the Employer shall be treated as provided by the Employer.

A Leased Employee shall not be considered an Employee of the Employer if:

(i)    Such Employee is covered by a money purchase pension plan providing:

(A)    A nonintegrated employer contribution rate of at least ten percent (10%) of compensation, as defined in Code Section 415(c)(3), but including amounts contributed by the Employer pursuant to a salary reduction agreement which are excludable from the Employee’s gross income under Code Sections 125, 132(0(4), 402(e)(3), 402(h) or 403(b),

(B)    Immediate participation, and

(C)    Full and immediate vesting; and
(ii)    Leased Employees do not constitute more than twenty percent (20%) of the Employer’s non-highly compensated workforce.

(r)     “Employer” or “Company” shall mean Mercury General Corporation and, if the context so requires, shall also mean an Affiliated Employer and/or a Non-Affiliated Employer that has adopted this Plan, and any successor of such Employer.

(s)    “Employer Contributions” shall mean the aggregate of “Matching Contributions” and “Profit Sharing Contributions” as those terms are defined under Section 3.01 and 3.02 respectively.

(t)    “Employment Date” shall mean the latest of:

(i)    The date on which the Employee is first credited with an Hour of Service for the Employer or an Affiliated or Non-Affiliated Employer or a Predecessor Employer; or

(ii)    His or her reemployment date if he or she incurs a Break in Service and is treated as a new Employee pursuant to Section 2.06.

(u)    “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended. Reference to a section of ERISA shall include that section and any comparable section or sections of any future legislation that amends, supplements or supersedes such section.



(v)    “Former ESOP Account” shall mean the separate sub-account of the Regular Account, reflecting all the contributions made to a Participant’s account under the prior ESOP features of the Plan. The ESOP feature was frozen on January 1, 2011.

(w)    “Fund” shall mean the aggregate of all assets held by the Funding Agent for the accounts of Participants and their Beneficiaries.

(x)    “Funding Agent” shall mean the insurance company or companies and/or Trustee(s) selected by the Board of Directors as a depository for assets accumulated under this Plan, severally or jointly, as the case may be.

(y)    “Funding Instrument” shall mean the Trust and/or insurance contract entered into by the Employer to fund this Plan.

(z)    “Highly Compensated Employee” shall mean any Employee who:

(i)     Was a 5% Owner at any time during the Plan Year or the preceding Plan Year; or

(ii)     For the preceding Plan Year –

(A)    Had Compensation from the Employer in excess of $160,000 (for 2025), as adjusted pursuant to Code Sections 414(q) and 415(d); and

(B)    Was in the top-paid group of Employees for such preceding Plan Year.

(iii)     For purposes of paragraph (i) above, an Employee shall be treated as a “5% Owner” for any Plan Year if at any time during such Plan Year such Employee was a five percent (5%) owner (as defined in Code Section 416(i)(l)) of the Employer.

(iv)     For purposes of paragraph (ii)(B) above, an Employee is in the “Top-Paid Group” of Employees for any Plan Year if such Employee is in the group consisting of the top twenty percent (20%) of the Employees when ranked on the basis of Compensation paid during such Plan Year. For purposes of determining the number of Employees in the top-paid group, the following Employees shall be excluded:

(A)    Employees who have not completed six (6) months of service,

(B)    Employees who normally work less than seventeen and one half (17½) hours per week,

(C)    Employees who normally work not more than six (6) months during any Plan Year,

(D)    Employees who have not attained age eighteen (18), and



(E)    Except to the extent provided in Treasury Regulations, Employees who are included in a unit of Employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and the Employer.

(v)     A former Employee shall be treated as a Highly Compensated former Employee if such Employee was a Highly Compensated Employee when such Employee separated from employment, or such Employee was a Highly Compensated Employee at any time after attaining age fifty-five (55).

(vi)     For purposes of this Section 1.02(z):

(A)    The term “Compensation” shall have the meaning given such term by Code Section 415(c)(3), provided that Compensation shall also include any remuneration which is excluded from the Participant’s gross income by reason of the application of Code Section 132(f)(4).

(B)    Employers aggregated under Code Sections 414(b), (c), (m), (n), or (o) shall be treated as a single Employer.

(vii)    The determination of who is a Highly Compensated Employee, including the determination of the number and identity of the Employees in the Top-Paid Group, will be made in accordance with Code Section 414(q) and the regulations thereunder except as specifically provided to the contrary in Code Section 401(a)(17).

(aa)    “Hour of Service” or “Hours of Service” shall mean the sum of the following:

(i)     For those Employees for whom actual records are maintained detailing hours for which an Employee is directly or indirectly paid, each hour for which an Employee is directly or indirectly paid, or entitled to payment, by the Employer for the performance of duties, plus each hour for which credit is not otherwise given for the performance of duties with respect to which back pay is awarded or agreed to by the Employer, computed without regard to any mitigation of damages and credited to the Plan Year in which the Employee performed the duties or with respect to which the back pay award or agreement pertains;

(ii)    For those Employees for whom no actual records are maintained detailing hours for which an Employee is directly or indirectly paid, one hundred and ninety (190) hours for each month in which such Employee works at least one (1) hour, pursuant to Section 2530.200b-3(e)(l)(iv) of the Department of Labor Regulations;

(iii)    Each hour, up to a maximum of five hundred and one (501) hours for any single continuous period, for which an Employee is


directly or indirectly paid, or entitled to payment, by the Employer for reasons other than the performance of duties (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence, excluding any such hours for which payment is made or due under a plan maintained solely for the purpose of complying with the applicable workers’ compensation, unemployment compensation or disability insurance laws and state disability payments, or which reimburses an Employee solely for medical or medically related expenses which he or she has incurred and credited to the applicable Plan Year. Any hours for which back pay is awarded for a period during which no duties are performed shall also be subject to the five hundred and one (501) hour maximum credit for any single continuous period; and

(iv)    Each hour, up to a maximum of five hundred and one (501) hours for any single continuous period, of absence incurred by an Employee for the purpose of:

(A)    Pregnancy,

(B)    Birth of a child,

(C)    Adoption of a child, or

(D)    Caring for a child immediately following birth or an adoption.

Such Employee shall be treated as having completed either the number of hours that would have been completed except for such absence or eight (8) Hours of Service for each normal workday where normal work hours are not known. Any hours required to be credited pursuant to this subsection (iv) must be credited only in the Plan Year in which the absence begins, if such crediting is necessary to prevent a Break in Service during such Year or in the following Plan Year.

(v)    Each other hour for which an Employee must be credited, pursuant to any applicable Federal law.

In determining the number of Hours of Service to be credited to an Employee for reasons other than the performance of duties, as well as in determining the Plan Year to which all Hours of Service should be credited, the rules of Section 2530.200b-2(b) and (c) of the Department of Labor regulations shall be followed to the extent such rules are not incorporated in this Plan.

(bb)    “In-Plan Roth Conversion Account” shall mean the Participant’s Account reflecting all amounts elected to be transferred into it via an In-Plan Roth transfer from the applicable Tax-Deferred Contribution Account, Employer Contributions, Voluntary Contributions Account and/or Tax-Deferred Rollover Contributions Account of the Participant pursuant to


Section 3.15 and Code Section 402(c)(4)(E). In addition, recordkeeping for the In-Plan Roth Conversion Account shall be maintained as follows:

(i)    The Plan will maintain a record of the amount of Tax-Deferred Contributions, Employer Contributions, Voluntary Contributions (as applicable), and Tax-Deferred Rollover Contributions Account (as applicable) in each Participant’s In-Plan Roth Conversion Account;

(ii)    Gains, losses, and other credits or charges shall be separately allocated on a reasonable and consistent basis to each Participant’s In-Plan Roth Conversion Account and the Participant’s other Regular Accounts under the Plan; and

(iii)    No contributions other than Tax-Deferred Contributions, Employer Contributions, Voluntary Contributions (if applicable), and Tax-Deferred Rollover Contributions Account (as applicable) and properly attributable earnings will be credited to each Participant’s In-Plan Roth Conversion Account.

(cc)    “Leveraged Shares” shall mean the definition provided under Section 3.16(a) of the Plan.

(dd)    “Loan Suspense Account” shall mean the definition provided under Section 3.17(a) of the Plan.

(ee)    “Matching Contribution” shall mean any contribution to the Plan made by the Employer for the Plan Year and allocated to a Participant’s Regular Account by reason of the Participant’s Tax-Deferred Contributions and/or Roth Contributions.

(ff)    “Non-Affiliated Employer” means an Employer who has adopted this Plan with the consent and written approval of Mercury General Corporation but is not an Affiliated Employer as that term is defined in this Plan. Where the context of the Plan requires, the term “Employer” includes a Non-Affiliated Employer.

(gg)    “Non-Highly Compensated Employee” shall mean an Employee of the Employer who is not a Highly Compensated Employee.

(hh)    “Normal Retirement Age” shall mean the first day of the month of the Participant’s sixty-fifth (65th) birthday.

(ii)    “Participant” shall mean any Eligible Employee who participates in the Plan in accordance with Article II, including any former Employee who is receiving or will receive benefits under the Plan. A Participant ceases to be a Participant when all funds to which he or she is entitled under the Plan have been distributed in accordance with the terms hereof. A Participant shall be treated as benefiting under the Plan for any Plan Year during which such Participant receives or is deemed to receive an allocation in accordance with Treasury Regulation Section 1.410(b)-3(a).



(jj)    “Participating Employer” shall mean the Employer, each Affiliated Employer and each Non-Affiliated Employer which, by resolution of its board of directors and with the written approval of the Employer, elects to participate in this Plan. All Participating Employers are identified under Appendix A.

(kk)    “Period of Service” shall mean a period of service commencing on the Employee’s Vesting Service Date and ending upon his or her Severance from Employment.

(ll)    “Period of Severance” shall mean the period of time commencing on the day after an Employee’s Severance from Employment and ending on his or her Reemployment Commencement Date.

(mm)    “Plan” shall mean the Mercury General Corporation Profit Sharing Plan as set forth herein, together with any and all amendments and supplements hereto.

(nn)    “Plan Year” shall mean the reporting year used by the Plan beginning on the first day of October and ending on the last day of September. The Plan Year shall be the limitation year for purposes of ERISA and for all purposes under this Plan. The limitation year may only be changed by a Plan amendment. Furthermore, if the Plan is terminated effective as of a date other than the last day of the Plan's limitation year, then the Plan is treated as if the Plan had been amended to change its limitation year.

(oo)    “Predecessor Employer” shall mean any corporation, partnership, or sole proprietorship, or a division thereof, a substantial part of the assets of which are acquired by the Employer either by purchase from, or liquidation, merger or consolidation of or with, such other corporation, partnership, or sole proprietorship, which has been designated by the Employer as a Predecessor Employer for purposes of this Plan.

In addition, a former employer is a Predecessor Employer with respect to a participant in a plan maintained by a former employer if the former employer maintains a plan under which such participant had accrued a benefit while performing services for the former employer, but only if that benefit is provided under the Plan maintained by the Employer. For this purpose, the formerly affiliated plan rules in Regulation Section 1.415(f)‑1(b)(2) apply as if the Employer and Predecessor Employer constituted a single employer under the rules described in Regulation Section 1.415(a)‑1(f)(1) and (2) immediately prior to the cessation of affiliation (and as if they constituted two, unrelated employers under the rules described in Regulation Section 1.415(a)‑1(f)(1) and (2) immediately after the cessation of affiliation) and cessation of affiliation was the event that gives rise to the Predecessor Employer relationship, such as a transfer of benefits or plan sponsorship.

    With respect to an employer of a Participant, a former entity that antedates the Employer is a Predecessor Employer with respect to the Participant if, under the facts and circumstances, the Employer constitutes a continuation of all or a portion of the trade or business of the former entity.



(pp)    “Profit Sharing Contributions” shall mean any contribution to the Plan made by the Employer for the Plan Year and allocated to a Participant’s Regular Account in accordance with Section 3.02.

(qq)    “Qualified Holder” shall mean the definition provided under Section 7.22(a) of the Plan.

(rr)    “Qualified Matching Contributions” shall mean that portion of the Matching Contributions pursuant to Section 3.01 which are to be treated as Tax-Deferred Contributions and/or Roth Contributions for the purposes of the Actual Deferral Percentage test described in Section 3.09(b).

(ss)    “Qualified Nonelective Contributions” shall mean contributions (other than Matching Contributions) made by the Employer which are to be treated as Tax-Deferred Contributions and/or Roth Contributions for purposes of the Actual Deferral Percentage test described in Section 3.09(b).

(tt)    “Reemployment Commencement Date” shall mean the first date following an Employee’s Severance from Employment on which the Employee performs an Hour of Service.

(uu)    “Regular Account” shall mean the accounts maintained by the Committee or its delegates for each Participant for the deposit of Employer Contributions and forfeitures, including the sub-accounts for Matching Contributions, Profit Sharing Contributions, and Company Stock held in the Former ESOP Accounts.

(vv)    “Roth Contributions” shall mean after-tax contributions made to the Plan during the Plan Year by the Employer, at the election of the Participant, in lieu of Compensation and shall include contributions made pursuant to a salary reduction agreement under the Plan made on behalf of a Participant in accordance with Section 3.03. Except for occasional, bona fide administrative considerations, contributions made pursuant to a salary reduction agreement will not precede the earlier of (1) the performance of services relating to the contribution and (2) when the Compensation that is subject to the election would be currently available to the Participant in the absence of a salary reduction agreement.

(ww)    “Roth Contributions Account” shall mean a Participant’s account hereunder to which his or her Roth Contributions, as defined in Section 1.02(vv), made pursuant to a salary reduction agreement are allocated pursuant to Section 3.03. In addition, recordkeeping for the Roth Contributions Account shall be maintained as follows:

(i)    The Plan will maintain a record of the amount of Roth Deferrals in each Participant’s Roth Contributions Account;

(ii)    Gains, losses, and other credits or charges shall be separately allocated on a reasonable and consistent basis to each Participant’s


Roth Contributions Account and the Participant’s other accounts under the Plan; and

(iii)    No contributions other than Roth Deferrals and properly attributable earnings will be credited to each Participant’s Roth Contributions Account.

(xx)    “Roth Rollover Contributions” shall mean those contributions made by a Participant pursuant to Section 3.06.

(yy)    “Roth Rollover Contributions Account” shall mean a Participant’s account hereunder to which his or her Roth Rollover Contributions, as defined in Section 1.02(xx), are allocated pursuant to Section 3.08 of the Plan. In addition, recordkeeping for the Roth Rollover Contributions Account shall be maintained as follows:

(i)    The Plan will maintain a record of the amount of Roth Rollover Contributions in each Participant’s Roth Rollover Contributions Account;

(ii)    Gains, losses, and other credits or charges shall be separately allocated on a reasonable and consistent basis to each Participant’s Roth Rollover Contributions Account and the Participant’s other accounts under the Plan; and

(iii)    No contributions other than Roth Rollover Contributions and properly attributable earnings will be credited to each Participant’s Roth Rollover Contributions Account.

(zz)    “Severance from Employment” means any termination of the employment relationship between an Employee and the Employer (or an Affiliated Employer or Non-Affiliated Employer) for reasons such as resignation, discharge, death, Total and Permanent Disability, or retirement, but only if that termination of employment constitutes a Severance from Employment within the meaning of Code Section 401(k)(2)(B)(i)(I).

(aaa)    “Spouse” means a Participant’s husband or wife pursuant to federal law.

(bbb)    “Substitute Loan” shall mean the definition provided under Section 3.17(b) of the Plan.

(ccc)    “Suspense Account” shall mean an account maintained by the Committee or its delegates pursuant to Section 4.02.

(ddd)    “Tax-Deferred Contributions” shall mean contributions made to the Plan during the Plan Year by the Employer, at the election of the Participant, in lieu of Compensation and shall include contributions made pursuant to a salary reduction agreement under the Plan made on behalf of a Participant in accordance with Section 3.03. Except for occasional, bona fide administrative considerations, contributions made pursuant to a salary reduction agreement will not precede the earlier of (1) the performance of services relating to the contribution and (2) when the Compensation that is


subject to the election would be currently available to the Participant in the absence of a salary reduction agreement.

(eee)    “Tax-Deferred Contributions Account” shall mean a Participant’s account hereunder to which his or her Tax-Deferred Contributions, as defined in Section 1.02(ddd), made pursuant to a salary reduction agreement are allocated pursuant to Section 3.03.

(fff)    “Tax-Deferred Rollover Contributions” shall mean the definition provided under Section 3.06 of the Plan.

(ggg)    “Tax-Deferred Rollover Contributions Account” shall mean a Participant’s account hereunder to which his or her Tax-Deferred Rollover Contributions, as defined in Section 1.02(fff), are allocated pursuant to Section 3.08 of the Plan.

(hhh)    “Total and Permanent Disability” a Participant who has been determined to be totally and permanently disabled under federal acts that provide compensation for personal injuries and sickness (e.g., Social Security disability benefits) and such Participant receives benefits under such determination. A Participant claiming Total and Permanent Disability must, within one hundred and twenty (120) days, give written notice thereof to the Committee or its delegate. If a Participant is unable to give such notice personally, the notice may be given by the Participant’s personal representative, whose appointment as such shall be demonstrated by evidence satisfactory to the Committee or its delegate at the time of the giving of the notice. Failure by the Participant to comply with the foregoing requirements shall be deemed conclusive evidence that the Participant does not suffer from a Total and Permanent Disability or has ceased to be so disabled as of the date of such failure.

(iii)    “Trust” shall mean the trust which is established to hold and invest contributions under this Plan.

(jjj)    “Trustee” (or “Trustees,” if more than one is appointed and acting) shall mean the trustee or trustees, whether original or successor, appointed under the Trust.

(kkk)    “Unallocated Dividends” shall mean the definition provided under Section 3.17(e) of the Plan.

(lll)    “Valuation Date” shall mean each business day of each Plan Year.

(mmm)    “Vesting Service Date” shall mean the date an Employee first completes an Hour of Service. If an Employee has a Severance from Employment and the Employee then performs an Hour of Service within twelve (12) months of such Severance from Employment, his or her Vesting Service Date is not adjusted upon his or her reemployment. Thus, a Period of Severance of less than twelve (12) months is treated as a Period of Service. For an Employee who has a Reemployment Commencement Date after a Period of Severance of twelve (12) months or more, the Vesting Service Date is an adjusted date. The adjusted date is determined by


counting backwards from the Reemployment Commencement Date the number of days previously credited to the Employee as a Period of Service. This process shall be repeated for Employees who are rehired more than once.

A Participant’s Vesting Service Date shall not be adjusted for the following period or periods of absence from service (that is, such period or periods shall be treated as a Period of Service) if the Employee was in the service of an Employer on the day prior to such a period:

(i)    Service in the Armed Forces of the United States or the Public Health Service of the United States as a result of which such Employee is entitled to reemployment rights from the Company pursuant to the provisions of Section 459 of Title 50 of the United States Code, provided that the Employee returns to work within the time period specified in Section 459.

(ii)    Approved absences granted (either before or after the absence) by the Employer in accordance with nondiscriminatory policies from any purpose, including, but not limited to, sickness or accident, or for the convenience of the Employer, and vacation periods.

(nnn)    “Voluntary Contributions” shall mean contributions made to the Plan during the Plan Year by the Employee, on an after-tax basis in accordance with Section 3.05.

(ooo)    “Voluntary Contributions Account” shall mean a Participant’s account hereunder to which his or her Voluntary Contributions, as defined in Section 1.02(nnn), are made pursuant to Section 3.05.

(ppp)    “Year of Vesting Service” shall mean a three hundred and sixty-five (365) day Period of Service. For this purpose, an Employee shall be credited with a number of Years of Vesting Service equal to the Employee’s Period of Service divided by three hundred and sixty-five (365). Any remaining Period of Service less than three hundred and sixty-five (365) days shall be disregarded. In computing the Years of Vesting Service rendered to the Company, a Participant’s total Period of Service shall be taken into account.

Where the context admits, words in the plural shall include the singular and the singular shall include the plural. The words “hereof,” “herein,” “hereunder,” and other similar compounds of the word “here” shall mean and refer to the entire Plan and not to any particular provision or section. The Plan and Funding Instrument shall each form a part of the other and the terms shall be used interchangeably.










ARTICLE II
PARTICIPATION

2.01    Eligibility for Tax-Deferred Contributions and Matching Contributions. Each Employee shall become eligible to make Tax-Deferred Contributions to the Plan in accordance with Section 3.03 (and to receive allocations of Matching Contributions on such Tax-Deferred Contributions in accordance with Section 3.01) as of the first day of the month next following the date on which he or she (1) completes sixty (60) days of employment as an Employee of the Employer, and (2) attains age eighteen (18).

2.02    Eligibility for Profit Sharing Contributions. Each Employee shall become eligible to receive Profit Sharing Contributions under the Plan on the later of:

(a)    The first day of the Plan Year in which he or she completes at least 1000 Hours of Service; and

(b)    The first day of the month coinciding with or next following the date on which he or she becomes eligible to make Tax-Deferred Contributions under Section 2.01.

2.03    Participation. Each Eligible Employee shall become a Participant in the Plan as soon as practicable upon meeting the eligibility criteria in Section 2.01 and 2.02. Eligible Employees of Participating Employers shall become a Participant in the Plan as soon as administratively practicable following the date the participating Employer meets the requirements of Section 11.02.

2.04    Restricted Participation. During any period that a Participant continues in the employ of the Employer but no longer is an Eligible Employee, as defined under Section 1.02(p), the Participant will be considered and treated as a Participant for all purposes of the Plan, except that no share of Employer Contributions or forfeitures will be credited to his or her Regular Account for any period during which he or she continues in the employ of the Employer, but is no longer an Eligible Employee.

Notwithstanding the preceding paragraph, a Participant who meets the requirements of Sections 3.01 and 3.02 for receiving an allocation of the Employer Contributions for a Plan Year, except for the fact that at some time during the Plan Year such Participant became a member of a group of Employees not covered by the Plan, shall be entitled to share in the allocation of Employer Contributions and forfeitures attributable to such Plan Year. Such Participant’s allocable share of Employer Contributions and forfeitures shall be determined on the basis of his or her Compensation for the period during which he or she was an Eligible Employee.

2.05    Participation After Normal Retirement Age. During the continuation of his or her employment with the Employer after attaining Normal Retirement Age, such Participant may continue to participate in the Plan and shall be entitled to receive a distribution of his or her benefits only upon actual termination of employment unless otherwise required pursuant to the provisions of Section 7.07 or otherwise permissible pursuant to the provisions of Section 7.02.

2.06    Participation Upon Reemployment.

(a)    An Employee, who has met the eligibility requirements described in Sections 2.01 and 2.02 but incurs a Severance from Employment prior to becoming a Participant and is later reemployed as an Eligible Employee,


shall become a Participant as of the later of (i) the first day of the month coinciding with or next following the date he or she met the eligibility requirements described herein, or (ii) his or her Reemployment Commencement Date.

(b)    A Participant who incurs a Severance from Employment and is later reemployed as an Eligible Employee shall resume participation immediately upon his or her Reemployment Commencement Date.

2.07    Beneficiary Designation.

(a)    A Participant may designate, in writing to the Committee or its delegate, the Beneficiary or Beneficiaries whom he or she desires to receive the benefits of the Plan in the event of his or her death. However, if a married Participant wishes to designate a person other than his or her Spouse as Beneficiary, such designation shall be consented to in writing by the Spouse, whose consent shall acknowledge the effect of the designation and be witnessed by a Plan representative or a notary public. The Participant may change any election designating a Beneficiary or Beneficiaries without any requirement of further spousal consent if the Spouse’s consent so provides.

(b)    A Participant may change or revoke a Beneficiary designation without the consent of such Beneficiary or Beneficiaries at any time by filing a new designation with the Committee or its delegate. Any Beneficiary designation is subject to the spousal consent rules described under this Section 2.07. Unless specified otherwise in the Participant’s designated Beneficiary election form, if a Beneficiary does not predecease the Participant but dies before distribution of the death benefit (or any part of it) is made to the Beneficiary, the death benefit (or the remaining portion of such benefit) will be paid to the Beneficiary’s estate.

(c)    If a Participant designates his or her Spouse as Beneficiary and subsequent to such Beneficiary designation, the Participant and Spouse are divorced or legally separated, the designation of the Spouse as Beneficiary under the Plan is automatically rescinded unless specifically provided otherwise under a divorce decree or qualified domestic relations order, or unless the Participant enters into a new Beneficiary designation naming the prior, or legally separated, Spouse as Beneficiary. Upon the marriage of a Participant, a designation of Beneficiary other than the Participant’s Spouse shall be automatically revoked.

(d)    To the extent a Participant has not designated a Beneficiary to receive his or her Plan benefits or the designated Beneficiary predeceased the Participant, then upon such Participant’s death, the Participant shall be deemed to have designated the first surviving class of the following classes of successive Beneficiaries:

(i)     The Participant’s surviving Spouse (if the Participant was married at the time of death);



(ii)    The Participant’s surviving children, including adopted children and stepchildren, in equal shares, except that the then living issue of a deceased child shall take in equal shares by right of representation the share which such child would have received if living;

(iii)    The Participant’s surviving biological or adoptive parents; or

(iv)    The Participant’s estate.

In any case where there is no personal representative of the Participant’s estate duly appointed and acting in that capacity within 90 days after the Participant’s death (or such extended period as the Committee determines is reasonably necessary to allow such personal representative to be appointed, but not to exceed 180 days after the Participant’s death), then Beneficiary shall mean the person who can verify by affidavit or court order to the satisfaction of the Committee that he or she is legally entitled to receive the benefits specified hereunder.

(e)    If a distribution is to be made to a minor or incompetent Beneficiary, payments may be made to the Beneficiary’s legal guardian, conservator, or custodian in accordance with the Uniform Gifts to Minors Act or similar law as permitted under the laws of the state where the Beneficiary resides. The Committee or its delegate will not be liable for any payments made in accordance with this Section 2.07 and are not required to make any inquiries with respect to the competence of any person entitled to benefits under the Plan.

(f)    Notwithstanding any provision of this Plan to the contrary, a designated Beneficiary may waive his/her right to receive benefits under the Plan upon the death of an eligible Participant; provided, however, that such waiver must be given in a writing witnessed by a notary public and on a form provided by the Plan. Any such waiver must be filed with the Plan at least 30 days prior to the earlier of (a) the death of the Participant, or (b) the death or incapacity of such designated Beneficiary. Notwithstanding the foregoing, a Beneficiary can waive his/her benefit after the death of the Participant if the waiver meets the requirements of a qualified disclaimer under Code Section 2518(b) and is a valid disclaimer under the law of the state in which the Participant resided at the time of his/her death, or other applicable law. Once such a waiver has been received by the Plan, it may not be revoked. In the event a designated Beneficiary has filed a waiver with the Plan as set forth above, then the benefit which such Beneficiary would have been entitled to receive shall be payable to the contingent Beneficiary designated by the Participant in writing and filed with the Plan prior to the Participant’s death or, if none, in accordance with the provisions of this Section 2.07, governing the disposition of benefits upon the death of a Participant who does not leave a surviving designated Beneficiary.






ARTICLE III
CONTRIBUTIONS

3.01    Matching Contributions. The Employer shall make Matching Contributions in an amount equal to the sum of (a) one hundred percent (100%) of a Participant’s Tax-Deferred Contributions made by or on behalf of each Participant to the extent such contributions do not exceed one percent (1%) of the Participant’s Compensation, plus (b) fifty percent (50%) of a Participant’s Tax-Deferred Contributions made by or on behalf of each Participant that exceed one percent (1%) of the Participant’s Compensation but do not exceed six percent (6%) of the Participant’s Compensation, calculated on a payroll period basis.

(a)    Eligibility. For purposes of Matching Contributions only, a person shall be eligible to share in the Matching Contributions, if such person was both a Participant and an Employee on any day of the contribution period (i.e. applicable payroll period).

(b)    True-Up Calculation. A “true-up” calculation will be performed each payroll period so that each Participant’s Matching Contribution will be maximized. The true-up calculation is performed in recognition of the possibility that a Participant’s Matching Contribution percentage may not be maximized as a result of: (1) changes to the Participant’s Tax-Deferred Contributions percentage(s) during the Plan Year or (2) the Participant reaching the Code Section 402(g) limit early in the Plan Year.

The Employer will make additional Matching Contributions to any such Participant’s Regular Account so that the Participant receives the maximum Matching Contributions available.

(c)    Catch-Up Contributions. No Matching Contributions shall be made for Tax-Deferred Contributions that are designated as catch-up contributions.

3.02    Profit Sharing Contributions. The Employer may make discretionary Profit Sharing Contributions in such amounts as shall be determined by the Board of Directors in its sole discretion. The Employer may, notwithstanding any other provision of this Plan, make Profit Sharing Contributions without regard to current or accumulated earnings and profits for the taxable year or years ending with or within such Plan Year. Profit Sharing Contributions, if any, shall be allocated in proportion to each Participant’s respective amounts of Compensation for such Plan Year. The timing of any such contribution shall be determined by the Board of Directors.

(a)    Eligibility. For purposes of Profit Sharing Contributions only, a person shall be eligible to share in Profit Sharing Contributions, if any, for a Plan Year only if he or she has been credited with one thousand (1,000) Hours of Service during the Plan Year and is both a Participant and an Employee on the last day of such Plan Year. Notwithstanding the foregoing, a person shall also be eligible to share in Profit Sharing Contributions if his or her employment terminated during such Plan Year due to attaining Normal Retirement Age, Total and Permanent Disability, or death.

3.03    Tax-Deferred Contributions. An Eligible Employee may reduce his or her Compensation and have the Employer contribute on his or her behalf Tax-Deferred Contributions in each Plan Year and/or irrevocably designate Roth Contributions to be made in


lieu of all or a portion of the Tax-Deferred Contributions such Eligible Employee is otherwise eligible to make under the Plan. Roth Contributions are treated by the Employer as includible in such Eligible Employee’s income at the time such Eligible Employee would have received that amount in cash if he or she had not elected to make Roth Contributions.

Tax-Deferred Contributions and Roth Contributions are subject to Section 4.01 (with regards to limitations on Annual Additions) and any limitation pursuant to the provisions of Section 7.03 (with regards to hardship distributions). An Eligible Employee may elect to contribute a minimum of one percent (1%) of his or her Compensation up to a maximum amount not to exceed the lesser of eighty percent (80%) of his or her Compensation for the Plan Year, or the applicable dollar amount limitation set forth in Code Section 402(g)(1) ($24,500 for 2026), as adjusted for increases in the cost of living.

(a)    Participant Election. The rate of his or her Tax-Deferred Contributions and/or Roth Contributions shall be determined by the Participant and communicated in the form and manner approved by the Committee or its delegate and shall continue unless changed in the manner hereinafter provided. All such contributions shall be calculated in integer percentages of a Participant’s Compensation. A Participant, by giving proper notice to the Committee or its delegate, may elect to change his or her Compensation reduction rate under this Section 3.03 (but not retroactively) within the limits prescribed hereinabove. The change in the Participant’s contribution rate shall be effective as soon as administratively feasible, however, not later than the Employer’s next unprocessed payroll.

(b)    Catch-Up Contributions. All Participants who are eligible to make Tax-Deferred Contributions and/or Roth Contributions under the Plan and who have attained or will attain age fifty (50) before the close of the Plan Year shall be eligible to make catch-up contributions in accordance with, and subject to the limitations of, Code Section 414(v) (seven thousand five hundred dollar ($8,000) for 2026), as adjusted for increases in the cost of living, including adjusted dollar amounts under Code Section 414(v) (as amended pursuant to SECURE 2.0 Act of 2022) for eligible participants who would attain age sixty (60) but would not attain age sixty-four (64) before the close of the taxable year. Such catch-up contributions shall be made in the form of Tax-Deferred Contributions and/or Roth Contributions but shall not be taken into account for purposes of the provisions of the Plan implementing the required limitations of Code Sections 402(g) and 415. The Plan shall not be treated as failing to satisfy the requirements of Code Sections 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416, as applicable, by reason of making catch-up contributions.

Effective January 1, 2026, if a Participant’s wages (as defined in Code Section 3121(a)) for the prior calendar year exceeded the wage limit in effect under Code Section 414(v)(7)(A) ($150,000, and as adjusted for inflation by the Secretary of Treasury after 2025), such Participant shall only be permitted to make Catch-Up Contributions as Roth Contributions for such Plan Year (the “Roth Catch-Up Requirement”). The Committee reserves the right to cancel and void any such Participant’s election to make Catch-Up Contributions as Tax-Deferred Contributions in such Plan Year, in accordance with the Committee’s practices and procedures


designed to result in compliance with the Roth Catch-Up Requirement. The Roth Catch-Up Requirement shall be applied in accordance with the Securing a Strong Retirement Act of 2022, passed as part of the Consolidated Appropriations Act of 2023 (“SECURE 2.0”), Code Section 414(v) and any Treasury Regulations and guidance published by the Internal Revenue Service thereunder, and any procedures established by the Committee.

(c)    Timing of Deposits. All Tax-Deferred Contributions and/or Roth Contributions shall be made by regular payroll deductions. The Employer will reduce the Participant’s Compensation in the amount authorized by the Participant and shall allocate such amount to his or her Tax-Deferred Contributions Account and/or Roth Contributions Account, as applicable, equal to such reduction as of the earliest date on which such amount can reasonably be segregated from the Employer’s general assets; provided, however, that such contribution shall be made no later than the fifteenth (15th) business day of the month following the date on which such amount would otherwise have been payable to the Participant in cash, or as of such earlier or later date (in the case of any available extensions of time) as may be required or permitted by regulations issued pursuant to ERISA.

3.04    Automatic Enrollment Contributions.

(a)    Automatic Enrollment Contributions. Subject to the remainder of this Section 3.04, unless an Eligible Employee affirmatively elects otherwise, his or her Compensation will be reduced by six percent (6%) (the “Automatic Enrollment Rate”), and such percentage will be increased in subsequent Plan Years in accordance with subsection (b) below. For each payroll period in which an Eligible Employee is an active Participant, the Employer will make Tax-Deferred Contributions (“Automatic Enrollment Contributions”) in such amount on the Participant’s behalf in accordance with the provisions of Section 3.03.

Automatic Enrollment Contributions will begin as soon as administratively feasible on or after the ninetieth (90th) day following the Eligible Employee’s date of hire or date that he or she first become an Eligible Employee. An Eligible Employee may make an affirmative election not to have Automatic Enrollment Contributions made on his or her behalf. Such election will be effective only with respect to Compensation that has not already become available to such Employee. If an Eligible Employee makes no such affirmative election, his or her Compensation shall be reduced and Automatic Enrollment Contributions will be made on his or her behalf in accordance with the provisions of subsections (a) and (b) of this Section 3.04, until such time as the Participant elects to change or revoke such Automatic Enrollment Contributions as provided in Sections 3.03 or 3.04(c).

(b)    Automatic Deferral Increase. Unless an Eligible Employee affirmatively elects otherwise after receiving appropriate notice, for each Eligible Employee contributing more than 0% and less than 10% in Tax-Deferred Contributions, his or her Tax-Deferred Contribution rate shall be increased annually by one percent (1%), not to exceed ten percent (10%)


of Compensation. Such increased Tax-Deferred Contributions will be made as soon as administratively feasible on or after the anniversary date of the Eligible Employee’s most recent date of hire or such other date selected by the Committee or its delegate.

(c)    Affirmative Election to Not Participate or Election out of Automatic Deferral Increase. Once a Participant has received notice that the Plan’s automatic enrollment or automatic deferral increase provisions are applicable to him or her, and he or she makes an affirmative election not to have Automatic Enrollment Contributions or automatic deferral increases made on his or her behalf, such Participant shall not be thereafter subject to the Plan’s automatic enrollment or automatic deferral increase provisions.

(d)    Permissible Withdrawal. A Participant who is automatically enrolled in the Plan in accordance with this Section 3.04 may withdraw the full amount of his or her Automatic Enrollment Contributions made pursuant to 3.04(a) provided such withdrawal is made not later than the ninetieth (90th) day after the date the first Automatic Enrollment Contributions were made on the Participant’s behalf.

3.05    Voluntary Contributions. A Participant may make Voluntary Contributions, subject to Section 4.01 (with regards to limitations on Annual Additions) and any limitation pursuant to the provisions of Section 7.03 (with regards to hardship distributions), a minimum of one percent (1%) of his or her Compensation up to a maximum amount not to exceed eighty percent (80%) of his or her Compensation for the Plan Year. Section 3.03(a) and (c) above regarding Participant election and timing of deposits shall be applicable for Voluntary Contributions.

3.06    Tax-Deferred Rollover Contributions and Roth Rollover Contributions. An Eligible Employee who has received an “Eligible Rollover Distribution” from an “Eligible Retirement Plan” (as those terms are defined in Section 7.10) may, in accordance with procedures approved by the Committee or its delegate, transfer the distribution received from the other plan to this Plan within sixty (60) days of the Eligible Employee’s receipt of the distribution from the other plan. For purposes of Tax-Deferred Rollover Contributions, the Eligible Rollover Distribution must be eligible for rollover treatment and exclusion from the gross income of the Participant in accordance with Code Section 402(c). For purposes of Roth Rollover Contributions, such Eligible Rollover Distribution must be from another Roth elective deferral account under an applicable retirement plan described in Code Section 402A(e)(1) and must comply with Code Section 402(c). Notwithstanding the foregoing, Tax-Deferred Rollover Contributions and Roth Rollover Contributions must not include amounts attributable to:

(a)    Taxpayer contributions to an individual retirement account or annuity under Code Section 408, whether or not deductible under Code Section 219;

(b)    Accumulated deductible employee contributions described in Code Section 72(o)(5)(B); or

(c)    A Roth IRA described in Code Section 408A.



The Committee or its delegate shall require that the Participant provide reasonable evidence to the Funding Agent that such rollover amount meets the above requirements. Failure of the Participant to provide such evidence will preclude the Plan’s acceptance of any such rollover. Furthermore, in a merger or acquisition where the acquired entity becomes a Participating Employer, a Participant may roll over his or her outstanding loan balance from the acquired entity’s qualified retirement plan to this Plan, provided certain requirements are satisfied. Specifically, a Participant shall be required to include as part of any such rollover, any note evidencing an outstanding loan that remains secured by his or her account balance. In such case, the notes, written agreements, and other documents evidencing the Participant’s loan must be forwarded and accepted by the Funding Agent. Furthermore, such Participant must agree to continue loan repayment through payroll deductions for the remaining loan period.

3.07    Transfers From Other Qualified Plans. Notwithstanding any other provision hereof, there may be transferred to the Funding Agent of this Plan all or any of the assets held (whether by a trustee, custodian or otherwise) on behalf of any other plan (excluding any such plan that requires payment of a qualified joint and survivor annuity) which satisfies the applicable requirements of Code Section 401(a), and which is maintained for the benefit of any persons who are or are about to become Participants in this Plan. Transferred amounts shall, at all times, meet the requirements of Code Section 414(1) and, notwithstanding any other provisions hereof, benefits available under the transferor plan which are protected under the provisions of Code Section 411(d)(6) shall be provided with respect to the assets so transferred to this Plan.

3.08    Tax-Deferred Rollover Contributions Account and Roth Rollover Contributions Account. Notwithstanding any other provision hereof, amounts transferred to the Funding Agent pursuant to Sections 3.06 and 3.07 shall be maintained in a separate account referred to as the “Tax-Deferred Rollover Contributions Account” or “Roth Rollover Contributions Account,” whichever is applicable, and shall be applied solely for the benefit of the Participant on whose behalf such amounts were transferred.

3.09    Nondiscrimination Testing. The Committee or its delegate shall have the responsibility for monitoring compliance with the requirements of this Section 3.09 and shall have the power to take any steps it deems appropriate to ensure compliance, including limiting the amount of Tax-Deferred Contributions and/or Roth Contributions permitted for Highly Compensated Employees or designating a portion of the Employer Contributions to be allocated to the Accounts of Non-Highly Compensated Employees, with such amount to be treated as part of their deferral percentage until such time as the Committee or its delegate determines that contributions can be made on behalf of the Highly Compensated Employees without violating the requirements of Code Section 401(k).

(a)    Actual Contribution Percentage (“ACP”) Test.

(i)    Actual Contribution Percentage (“ACP”) shall mean the ratio (expressed as a percentage) of:

(A)    The sum of the Voluntary Contributions, if any, and Matching Contributions made on behalf of a Participant for the Plan Year to

(B)    The Compensation paid to such Participant for the Plan Year.



(ii)    The ACP shall be determined subject to the following provisions:

(A)    The ACP for any Participant who is a Highly Compensated Employee and who is eligible to have Matching Contributions or Voluntary Contributions allocated to his or her account under two (2) or more plans described in Code Section 401(a), or arrangements described in Code Section 401(k) that are maintained by the same Employer, shall be determined as if the total of such contributions was made under each plan and arrangement. If a Highly Compensated Employee participates in two (2) or more such plans or arrangements that have different plan years, then all Matching Contributions and Voluntary Contributions made during the Plan Year being tested under all such plans and arrangements shall be aggregated, without regard to the plan years of the other plans. For Plan Years beginning before the effective date of this Amendment, all such plans and arrangements ending with or within the same calendar year shall be treated as a single plan or arrangement. Notwithstanding the foregoing, certain plans shall be treated as separate if mandatorily disaggregated under the Treasury Regulations of Code Section 401(m).

(B)    In the event that this Plan satisfies the requirements of Code Sections 401(m), 401(a)(4), or 410(b) only if aggregated with one (1) or more other plans, or if one (1) or more other plans satisfy the requirements of such Code Sections only if aggregated with this Plan, then this Section 3.09(a) shall be applied by determining the ACP of Employees as if all such plans were a single plan. Other plans may be aggregated with this Plan in order to satisfy Code Section 401(m) only if they have the same Plan Year.

(C)    For purposes of performing the ACP test, Voluntary Contributions are considered to have been made in the Plan Year in which contributed to the Plan. Matching Contributions and Qualified Nonelective Contributions will be considered made for a Plan Year if made no later than the end of the twelve (12)-month period beginning on the day after the close of the Plan Year.

(D)    Tax-Deferred Contributions and Roth Contributions may be used in determining the ACP amounts so long as the ADP test is met before the Tax-Deferred Contributions and Roth Contributions are used in the ACP test and so long as the ADP test continues to be met following the exclusion of those Tax-Deferred Contributions and Roth Contributions that are used to meet the ACP test.

(E)    The ACP of all Eligible Employees shall be taken into account for the purposes of the ACP test under this Plan.


For this purpose, Eligible Employees shall include each Employee who would be a Participant under the Plan and eligible to receive an allocation of Matching Contributions hereunder, except that such Employee is not a Participant because:

(1)    He has failed to make required contributions, if any;

(2)    He has elected not to participate; or

(3)    His Compensation is less than a stated dollar amount, if such amount is a condition of his or her participation.

In the case of an Eligible Employee who makes no Voluntary Contributions and receives no Matching Contribution, his or her ACP shall be deemed to be zero percent (0%).

(F)    Qualified Nonelective Contributions (as defined in Treasury Regulation Section 1.401(k)-6) cannot be taken into account under the ACP test for a Plan Year for a Non-Highly Compensated Employee to the extent such contributions exceed the product of that Non-Highly Compensated Employee’s Code Section 414(s) compensation and the greater of five percent (5%) or two (2) times the Plan’s “representative contribution rate.” Any Qualified Nonelective Contribution taken into account under an ADP test under Treasury Regulation Section 1.401(k)-2(a)(6) (including the determination of the “representative contribution rate” for purposes of Treasury Regulation Section 1.401(k)-2(a)(6)(iv)(B)) is not permitted to be taken into account for purposes of this Section (including the determination of the “representative contribution rate” for purposes of subsection (1) below). For purposes of this Section:

(1)    The Plan’s “representative contribution rate” is the lowest “applicable contribution rate” of any eligible Non-Highly Compensated Employee among a group of eligible Non-Highly Compensated Employees that consists of half of all eligible Non-Highly Compensated Employees for the Plan Year (or, if greater, the lowest “applicable contribution rate” of any eligible Non-Highly Compensated Employee who is in the group of all eligible Non-Highly Compensated Employees for the Plan Year and who is employed by the Employer on the last day of the Plan Year), and

(2)    The “applicable contribution rate” for an eligible Non-Highly Compensated Employee is the sum of the matching contributions (as defined in Treasury Regulation Section 1.401(m)-1(a)(2)) taken into account in determining the ACP for the eligible Non-Highly Compensated Employee


for the Plan Year and the Qualified Nonelective Contributions made for that Non-Highly Compensated Employee for the Plan Year, divided by that Non-Highly Compensated Employee’s Code Section 414(s) compensation for the Plan Year.

Notwithstanding the above, Qualified Nonelective Contributions that are made in connection with an Employer’s obligation to pay prevailing wages under the Davis-Bacon Act (46 Stat. 1494), Public Law 71-798, Service Contract Act of 1965 (79 Stat. 1965), Public Law 89-286, or similar legislation can be taken into account for a Plan Year for a Non-Highly Compensated Employee to the extent such contributions do not exceed ten percent (10%) of that Non-Highly Compensated Employee’s Code Section 414(s) compensation.

(G)    A Matching Contribution with respect to Tax-Deferred Contributions and Roth Contributions for a Plan Year is not taken into account under the ACP test for a Non-Highly Compensated Employee to the extent it exceeds the greatest of:

(1)    five percent (5%) of the Non-Highly Compensated Employee’s Code Section 414(s) compensation for the Plan Year;

(2)    the Non-Highly Compensated Employee’s Tax-Deferred Contributions and Roth Contributions for the Plan Year; and

(3)    the product of two (2) times the Plan’s “representative matching rate” and the Non-Highly Compensated Employee’s Tax-Deferred Contributions and Roth Contributions for the Plan Year.

For purposes of this Section, the Plan’s “representative matching rate” is the lowest “matching rate” for any eligible Non-Highly Compensated Employee among a group of Non-Highly Compensated Employees that consists of half of all eligible Non-Highly Compensated Employees in the Plan for the Plan Year who make Tax-Deferred Contributions for the Plan Year (or, if greater, the lowest “matching rate” for all eligible Non-Highly Compensated Employees in the Plan who are employed by the Employer on the last day of the Plan Year and who make Tax-Deferred Contributions for the Plan Year).

For purposes of this Section, the “matching rate” for an Employee generally is the Matching Contributions made for such Employee divided by the Employee’s Tax-Deferred Contributions for the Plan Year.



(H)    Except as otherwise provided in this Section, the Plan may use the current year testing method or prior year testing method for the ACP test for a Plan Year without regard to whether the current year testing method or prior year testing method is used for the ADP test for that Plan Year. However, if different testing methods are used, then the Plan will not use:

(1)    The recharacterization method of Treasury Regulation Section 1.401(k)-2(b)(3) to correct excess contributions for a Plan Year;

(2)    The rules of Treasury Regulation Section 1.401(m)-2(a)(6)(ii) to take Tax-Deferred Contributions into account under the ACP test (rather than the ADP test); or

(3)    The rules of Treasury Regulation Section 1.401(k)-2(a)(6) to take Qualified Matching Contributions into account under the ADP test (rather than the ACP test).

(b)    Actual Deferral Percentage (“ADP”) Test.

(i)    “Actual Deferral Percentage” (ADP) shall mean the ratio (expressed as a percentage) of:

(A)    The Tax-Deferred Contributions, Roth Contributions, Qualified Matching Contributions, and Qualified Nonelective Contributions, if any, made on behalf of a Participant for the Plan Year to

(B)    The Compensation paid to such Participant for the Plan Year.

(C)    The ADP shall be determined subject to the following provisions:

(1)    The ADP of any Participant who is a Highly Compensated Employee for the Plan Year and who is eligible to have Tax-Deferred Contributions and/or Roth Contributions (and Qualified Nonelective Contributions or Qualified Matching Contributions, or both, if treated as Tax-Deferred Contributions and Roth Contributions for purposes of the ADP test) allocated to such Participant’s accounts under two (2) or more cash or deferred arrangements described in Code Section 401(k), that are maintained by the same Employer, shall be determined as if such Tax-Deferred Contributions and Roth Contributions (and, if applicable, such Qualified Nonelective Contributions or Qualified Matching Contributions, or both) were made under a single arrangement. If a Highly Compensated Employee participates in two or more cash or deferred arrangements


of the Employer that have different Plan Years, then all Tax-Deferred Contributions and Roth Contributions made during the Plan Year being tested under all such cash or deferred arrangements shall be aggregated, without regard to the plan years of the other plans. However, if the plans have different Plan Years, then all such cash or deferred arrangements ending with or within the same calendar year shall be treated as a single cash or deferred arrangement. Notwithstanding the foregoing, certain plans shall be treated as separate if mandatorily disaggregated under the Treasury Regulations of Code Section 401(k).

(D)    In the event that this Plan satisfies the requirements of Code Section 401(k), 401(a), or 410(b) only if aggregated with one (1) or more other plans, or if one (1) or more other plans satisfy the requirements of such Code Sections only if aggregated with this Plan, then this Section 4.04(a)(ii) shall be applied by determining the ADP of Employees as if all such plans were a single plan. Other plans may be aggregated with the Plan to satisfy Code Section 401(k) only if they have the same Plan Year.

(E)    For purposes of determining the ADP test, Tax-Deferred Contributions, Roth Contributions, Qualified Nonelective Contributions and Qualified Matching Contributions shall be taken into account under the ADP test for a Plan Year only if allocated to an Employee as of a date within that Plan Year. For this purpose, such allocation shall not be contingent on participation or performance of services after such date and actual payment to the Fund shall be made before the last day of the twelve (12) month period immediately following the Plan Year to which such deferrals or contributions relate.

(F)    The ADP of all Eligible Employees shall be taken into account for the purposes of the ADP test under this Plan. For this purpose, Eligible Employees shall include each Employee who would have been eligible to make Tax-Deferred Contributions and/or Roth Contributions under the Plan, except that no Tax-Deferred Contributions and/or Roth Contributions were made because such Employee:

(1)    Was suspended from making Tax-Deferred Contributions and Roth Contributions due to a distribution, loan or a suspension caused by the limitations on Annual Additions of Code Section 415(c)(l) or 415(e);

(2)    Elected not to participate in the Plan; or

(3)    Received Compensation less than a stated dollar amount, if such amount is a condition of his or her participation in the Plan.



In the case of an Eligible Employee who makes no Tax-Deferred Contributions or Roth Contributions, his or her ADP shall be deemed to be zero percent (0%).

(G)    Qualified Nonelective Contributions (as defined in Treasury Regulation Section 1.401(k)-6) will not be taken into account in determining the ADP for a Plan Year for a Non-Highly Compensated Employee to the extent such contributions exceed the product of that Non-Highly Compensated Employee’s Code Section 414(s) compensation and the greater of five percent (5%) or two (2) times the Plan’s “representative contribution rate.” Any Qualified Nonelective Contribution taken into account under an ACP Test under Treasury Regulation Section 1.401(m)-2(a)(6)(v)(B), is not permitted to be taken into account for purposes of this Section (including the determination of the “representative contribution rate”). For purposes of this Section:

(1)    The Plan’s “representative contribution rate” is the lowest “applicable contribution rate” of any eligible Non-Highly Compensated Employee among a group of eligible Non-Highly Compensated Employees that consists of half of all eligible Non-Highly Compensated Employees for the Plan Year (or, if greater, the lowest “applicable contribution rate” of any eligible Non-Highly Compensated Employee who is in the group of all eligible Non-Highly Compensated Employees for the Plan Year and who is employed by the Employer on the last day of the Plan Year), and

(2)    The “applicable contribution rate” for an eligible Non-Highly Compensated Employee is the sum of the Qualified Matching Contributions (as defined in Treasury Regulation Section 1.401(k)-6) taken into account in determining the ADP for the eligible Non-Highly Compensated Employee for the Plan Year and the Qualified Nonelective Contributions made for the eligible Non-Highly Compensated Employee for the Plan Year, divided by the eligible Non-Highly Compensated Employee’s Code Section 414(s) compensation for the same period.

Notwithstanding the above, Qualified Nonelective Contributions that are made in connection with an Employer’s obligation to pay prevailing wages under the Davis-Bacon Act (46 Stat. 1494), Public Law 71-798, Service Contract Act of 1965 (79 Stat. 1965), Public Law 89-286, or similar legislation may be taken into account for a Plan Year for an Non-Highly Compensated Employee to the extent such contributions do not exceed 10 percent


(10%) of that Non-Highly Compensated Employee’s Code Section 414(s) compensation.

Qualified Matching Contributions may only be used to calculate an ADP to the extent that such Qualified Matching Contributions are matching contributions that are not precluded from being taken into account under the ACP test for the Plan Year under the rules of Treasury Regulation Section 1.401(m)-2(a)(5)(ii) and as set forth herein.

(H)    Qualified Nonelective Contributions and Qualified Matching Contributions will not be taken into account to determine an ADP to the extent such contributions are taken into account for purposes of satisfying any other ADP test or ACP test.

(I)    Except as otherwise provided in this Section, the Plan may use the current year testing method or prior year testing method for the ADP test for a Plan Year without regard to whether the current year testing method or prior year testing method is used for the ACP test for that Plan Year. However, if different testing methods are used, then the Plan will not use:

(1)    The recharacterization method of Treasury Regulation Section 1.401(k)-2(b)(3) to correct excess contributions for a Plan Year;


(2)    The rules of Treasury Regulation Section 1.401(m)-2(a)(6)(ii) to take Tax-Deferred Contributions and Roth Contributions into account under the ACP test (rather than the ADP test); or

(3)    The rules of Treasury Regulation Section 1.401(k)-2(a)(6)(v) to take Qualified Matching Contributions into account under the ADP test (rather than the ACP test).

(c)    Neither the average ACP nor the average ADP for all Participants who are Highly Compensated Employees for the Plan Year shall exceed the greater of:

(i)    The average ACP or the average ADP for the preceding Plan Year, as applicable, for all Participants who are Non-Highly Compensated Employees for the Plan Year multiplied by one and one quarter (1.25); or

(ii)    The average ACP or the average ADP for the preceding Plan Year for all Participants who are Non-Highly Compensated Employees, as applicable, multiplied by two (2.00), provided such averages for the Highly Compensated Employees do not exceed such averages


for Non-Highly Compensated Employees by more than two (2) percentage points, or such lesser amount as the Secretary of the Treasury shall prescribe.

The Plan shall not test under this Section 4.04(c)(ii) to meet applicable Code requirements for both contributions and deferrals in the same year.

(d)    The Employer will apply the ADP test by comparing the ADP of the Highly Compensated Employees to the ADP of the Non-Highly Compensated Employees in the current Plan Year.

(e)    The determination and treatment of the ACP and the ADP of a Participant shall at all times satisfy Treas. Reg. 1.401(k)-1, 1.401(m)-1, 1.401(m)-2 and such other requirements as may be required by the Secretary of Treasury.

3.10    Excess Deferrals, Excess Contributions and Excess Aggregate Contributions. The Committee or its delegate shall determine, as soon as is reasonably possible after the close of each Plan Year, Employer Contributions pursuant to Sections 3.01 and 3.02 and Tax-Deferred Contributions and Roth Contributions pursuant to Section 3.03, if applicable, which will result in Excess Deferrals, Excess Contributions, or Excess Aggregate Contributions for any Participant. In addition, prior to the close of each Plan Year the Committee or its delegate, upon a determination that the ADP test will not be met for such Plan Year, may direct at any time that an individual Highly Compensated Employee’s future Tax-Deferred Contributions and/or Roth Contributions be reduced or stopped in order to avoid accumulating Excess Deferrals or Excess Contributions under the Plan.

Notwithstanding any other provisions of this Plan, Excess Deferrals, Excess Contributions, Excess Aggregate Contributions and income allocable thereto shall be distributed to Participants as described in this Section 3.10.

(a)    For the purpose of this Section 3.10:

(i)    “Excess Deferrals” shall mean amounts of Tax-Deferred Contributions, Roth Contributions, Qualified Matching Contributions, and Qualified Nonelective Contributions for a calendar year that:

(A)    The Participant requests be distributed pursuant to the claims procedure set forth in Section 4.05(b) below; or

(B)    The Committee or its delegate determines to be, pursuant to Treas. Reg. 1.401(k)-l, Excess Deferrals.

(ii)    “Qualified Matching Contributions” and “Qualified Nonelective Contributions” shall mean contributions reclassified for the purpose of meeting the ADP test. Such reclassification shall be permitted only if the following requirements are met:

(A)    Employer Contributions, including those Qualified Nonelective Contributions treated as Tax-Deferred Contributions and Roth Contributions for purposes of the


ADP test, must satisfy the requirements of Code Section 401(a)(4);

(B)    Employer Contributions, excluding those Qualified Matching Contributions and Qualified Nonelective Contributions treated as Tax-Deferred Contributions for purposes of the ADP test, must satisfy the requirements of Code Section 401(a)(4);

(C)    Those Qualified Matching Contributions and Qualified Nonelective Contributions treated as Tax-Deferred Contributions and Roth Contributions for purposes of the ADP test shall not be taken into account for purposes of satisfying the requirements of Code Section 401(m);

(D)    Except as provided in paragraphs (A) and (C), Qualified Matching Contributions and Qualified Nonelective Contributions treated as Tax-Deferred Contributions and Roth Contributions for the purposes of the ADP test shall not be taken into account in determining whether any other contributions or benefits satisfy Code Section 401(a)(4) or in determining whether Voluntary Contributions or Matching Contributions meet the requirements of Code Section 401(m);

(E)    Qualified Nonelective Contributions may not be treated as Tax-Deferred Contributions or Roth Contributions if the effect of such treatment is to increase the difference between the ADP for the group of eligible Highly Compensated Employees and the ADP of all other Eligible Employees;

(F)    The Qualified Nonelective Contributions must satisfy the requirements of Treas. Reg. 1.401(k)-l(b)(5) for the Plan Year as if such contributions were Tax-Deferred Contributions or Roth Contributions;

(G)    Qualified Matching Contributions and Qualified Nonelective Contributions must be taken into account during the Plan Year in which they are deemed made; and

(H)    Any other applicable conditions described in Treas. Reg. 1.401(m)-l(b)(2) are satisfied.

(iii)    “Excess Contributions” shall mean amounts described in Code Section 401(k)(8)(B). The amount of Excess Contributions for a Highly Compensated Employee shall be determined in the following manner:

(A)    First, the ADP of the Highly Compensated Employee with the highest ADP shall be reduced to the extent necessary to satisfy the ADP test or to cause the percentage to equal the


ADP of the Highly Compensated Employee with the next highest percentage. This process shall be repeated until the ADP test is satisfied.

(B)    The dollar amount of Excess Contributions for the Highly Compensated Employee group shall be equal to the aggregate of each Highly Compensated Employee’s total Tax-Deferred Contributions, Roth Contributions or other contributions taken into account for the ADP test minus the product of the Employee’s contribution ratio as determined above and the Employee’s Compensation.

(C)    The Tax-Deferred Contributions of the Highly Compensated Employee with the highest dollar amount of Tax-Deferred Contributions and/or Roth Contributions shall be reduced by the amount required to cause that Highly Compensated Employee’s dollar amount of Tax-Deferred Contributions and/or Roth Contributions to equal the dollar amount of elective contributions of the Highly Compensated Employee with the next highest dollar amount of Tax-Deferred Contributions and/or Roth Contributions. In no event shall the reduction of the Tax-Deferred Contributions and/or Roth Contributions of the Highly Compensated Employee with the highest dollar amount of Tax-Deferred Contributions and/or Roth Contributions exceed the aggregate dollar amount of Excess Contributions for the Highly Compensated Employee group as determined in (B) above. This process shall be repeated until the aggregate dollar amount of Excess Contributions for the Highly Compensated Employee group has been allocated to Highly Compensated Employees.

(D)    The amount by which a Highly Compensated Employee’s dollar amount of Tax-Deferred Contributions and/or Roth Contributions must be reduced shall be his or her Excess Contribution.

(iv)    “Excess Aggregate Contributions” shall mean amounts described in Code Section 401(m)(6)(B). The amount of Excess Aggregate Contributions for a Highly Compensated Employee shall be determined in the following manner:

(A)    First, the ACP of the Highly Compensated Employee with the highest ACP shall be reduced to the extent necessary to satisfy the ACP test or cause the percentage to equal the ACP of the Highly Compensated Employee with the next highest percentage. This process shall be repeated until the ACP test is satisfied.

(B)    The dollar amount of Excess Aggregate Contributions for the Highly Compensated Employee group shall be equal to


the aggregate of each Highly Compensated Employee’s total amount of Voluntary Contributions, Matching Contributions, and other contributions taken into account for the ACP test minus the product of the Employee’s contribution ratio as determined above and the Employee’s Compensation.

(C)    The Voluntary Contributions, Matching Contributions, and other contributions of the Highly Compensated Employee with the highest dollar amount of Voluntary Contributions, Matching Contributions, and other contributions shall be reduced by the amount required to cause that Highly Compensated Employee’s dollar amount of Voluntary Contributions, Matching Contributions, and other contributions to equal the dollar amount of Voluntary Contributions, Matching Contributions, and other contributions of the Highly Compensated Employee with the next highest dollar amount of Voluntary Contributions, Matching Contributions, and other contributions. In no event shall the reduction of the Voluntary Contributions, Matching Contributions, and other contributions of the Highly Compensated Employee with the highest dollar amount of Voluntary Contributions, Matching Contributions, and other contributions exceed the aggregate dollar amount of Excess Aggregate Contributions for the Highly Compensated Employee group as determined in (B) above. This process shall be repeated until the aggregate dollar amount of Excess Aggregate Contributions for the Highly Compensated Employee group has been allocated to Highly Compensated Employees.

(D)    The amount by which a Highly Compensated Employee’s dollar amount of Voluntary Contributions, Matching Contributions, and other contributions must be reduced shall be his or her Excess Aggregate Contribution.

(b)    A Participant may determine that deferrals in excess of the limits imposed by Code Section 402(g) have been made. Such Participant may request a distribution of such Excess Deferral amounts by submitting a claim in writing to the Committee or its delegate no later than March 1, specifying the Participant’s Excess Deferral amount for the preceding calendar year. Such claim shall include the Participant’s written statement that if such amounts are not distributed, such Excess Deferral amounts, when added to amounts deferred under other plans or arrangements as described in Code Sections 401(k), 408(k), or 403(b), exceed the limit imposed on the Participant by Code Section 402(g) for the year in which the deferral occurred.

Notwithstanding the above, a Participant shall be deemed to have made the designation for the distribution of Excess Deferrals at any time the Committee or its delegate determines that the limits of Code Section


402(g) would be exceeded by the Plan or the plan of any Affiliated Employer.

(c)    Notwithstanding any other provision of the Plan to the contrary:

(i)    Excess Deferrals and income allocable thereto shall be distributed after the date on which the Plan received the Excess Deferral, but no later than the April 15 following the calendar year during which such Excess Deferral was made. Any such distribution shall be designated by the Plan as a distribution of Excess Deferrals. Excess Deferrals to be distributed with respect to an Employee for an Employee’s taxable year shall be reduced by any Excess Contributions previously distributed with respect to such Employee for the Plan Year ending within such taxable year. With respect to Excess Deferrals made in taxable year 2007, the Committee or its delegate must calculate allocable income for the taxable year and also for the gap period (i.e., the period after the close of the taxable year in which the Excess Deferrals occurred and prior to the distribution). However, with respect to Excess Deferrals made in taxable years after 2007, gap period income may not be distributed.

(ii)    A Participant’s Excess Contributions and income allocable thereto, shall be distributed to the Participant, if administratively feasible, not later than two and one-half (2½) months following the close of the Plan Year in which such Excess Contributions were made, but in any event, no later than the last day of the Plan Year following the close of the Plan Year in which the Excess Contributions were made. If such excess amounts are distributed more than two and one-half (2½) months following the close of the Plan Year in which such excess amounts arose, a ten percent (10%) excise tax will be imposed on the Employer with respect to such amounts. The amount of Excess Contributions to be distributed with respect to an Employee for a Plan Year shall be reduced by any Excess Deferrals previously distributed to such Employee for the Employee’s taxable year ending with or within such Plan Year.

(iii)    A Participant’s Excess Aggregate Contributions and income allocable thereto shall be distributed to each Participant, if administratively feasible, not later than two and one-half (2½) months following the close of the Plan Year in which such Excess Aggregate Contributions were made, but in any event, no later than the last day of the Plan Year following the close of the Plan Year in which the Excess Aggregate Contributions were made. If such excess amounts are distributed more than two and one-half (2½) months following the close of the Plan Year in which such amounts arose, a ten percent (10%) excise tax will be imposed on the Employer with respect to such amounts.

(d)    Distribution of Income Attributable to Excess Contributions. Distributions of Excess Contributions must be adjusted for income (gain or loss), including an adjustment for income for the period between the


end of the Plan Year and the date of the distribution (the “gap period”). The Committee or its delegate will not calculate and distribute allocable income for the gap period (i.e., the period after the close of the Plan Year in which the Excess Contributions occurred and prior to the distribution). The Committee or its delegate has the discretion to determine and allocate income using any of the methods set forth below:

(i)    Reasonable method of allocating income. The Committee or its delegate may use any reasonable method for computing the income allocable to excess contributions, provided that the method does not violate Code Section 401(a)(4), is used consistently for all Participants and for all corrective distributions under the Plan for the Plan Year, and is used by the Plan for allocating income to Participant’s Accounts. The Plan will not fail to use a reasonable method for computing the income allocable to Excess Contributions merely because the income allocable to Excess Contributions is determined on a date that is no more than seven (7) days before the distribution.

(ii)    Alternative method of allocating income. The Committee or its delegate may allocate income to Excess Contributions for the Plan Year by multiplying the income for the Plan Year allocable to the Tax-Deferred Contributions, Roth Contributions and other amounts taken into account under the ADP test (including contributions made for the Plan Year), by a fraction, the numerator of which is the excess contributions for the Employee for the Plan Year, and the denominator of which is the sum of the:

(1)    Account balance attributable to Tax-Deferred Contributions, Roth Contributions and other amounts taken into account under the ADP test as of the beginning of the Plan Year, and

(2)    Any additional amount of such contributions made for the Plan Year.

(e)    Distribution of Income Attributable to Excess Aggregate Contributions. For purposes of determining and allocating gap period income attributable to Excess Aggregate Contributions, the Committee or its delegate has the discretion to use any of methods described above in Section 3.10(d), except that such Section shall be applied by substituting “Excess Contributions” with “Excess Aggregate Contributions” and by substituting amounts taken into account under the ACP test for amounts taken into account under the ADP test. The Committee or its delegate will not calculate and distribute allocable income for the gap period (i.e., the period after the close of the Plan Year in which the Excess Aggregate Contributions occurred and prior to the distribution).

(f)    Income shall include all earnings and appreciation, including such items as interest, dividends, rent, royalties, gains or losses from the sale of property, appreciation or depreciation in the value of stocks, bonds,


annuity and life insurance contracts, and other property, without regard to whether such appreciation or depreciation has been realized.

(g)    The Committee or its delegate shall not be liable to any Participant (or his or her Beneficiary, if applicable) for any losses caused by misestimating the amount of any Excess Deferrals, Excess Contributions, or Excess Aggregate Contributions and income allocable to such excess.

(h)    Excess Contributions distributed under this Section 3.10 shall first be treated as distributions from the Participant’s Roth Contributions Account, if any. If there are not sufficient Roth Contributions for the Plan Year, any additional distributions will be made from the Participant’s Tax-Deferred Contributions Account, if any. To the extent such Excess Contributions exceed the amount of Roth Contributions and Tax-Deferred Contributions made by a Participant for the Plan Year, distributions shall be made from such Participant’s Regular Account, beginning with such Participant’s Voluntary Contributions for the Plan Year, if any. If there are not sufficient Voluntary Contributions for the Plan Year, any addition distributions will be made from the Participant’s Matching Contributions for the Plan Year. Excess Aggregate Contributions shall first be distributed from the Participant’s Voluntary Contributions for the Plan Year. If there are not sufficient Voluntary Contributions for the Plan Year, any additional distributions will be made from the Participant’s Matching Contributions for the Plan Year.

(i)    In any year where the Plan allows Voluntary Contributions, a Participant’s Excess Contributions may be recharacterized as an amount distributed to the Participant and then contributed by the Participant to the Plan. Recharacterized amounts will remain nonforfeitable and subject to the same distribution requirements as Tax-Deferred Contributions. Amounts may not be recharacterized by a Highly Compensated Employee, to the extent that such amount, in combination with other Voluntary Contributions made by that Employee, would exceed any stated limit under the Plan on Voluntary Contributions. Recharacterization must occur no later than two and one-half (2½) months after the last day of the Plan Year in which such Excess Contributions arose and is deemed to occur no earlier than the date the last Highly Compensated Employee is informed in writing of the amount recharacterized and the consequences thereof. Recharacterized amounts will be taxable to the Participant for the Participant’s tax year in which the Participant would have received such amounts in cash.

3.11    Correction Through Qualified Nonelective Contributions. Upon a determination that the ADP test failed for any Plan Year, the Committee or its delegate may elect to correct such failure by making Qualified Nonelective Contributions to the accounts of Non-Highly Compensated Employees. Such Qualified Nonelective Contributions, if made, will be contributed in a manner that fully complies with the requirements of Treasury Regulations Section 1.401(k)-2(a)(6)(iv). Qualified Nonelective Contributions made pursuant to this Section 3.11 remain subject to all applicable Plan limitations and the limitation imposed by Code Sections 401(a)(4), 402(g), and 415(c).



If a failed ADP test is to be corrected by making Qualified Nonelective Contributions, such corrective contributions made on behalf of any Non-Highly Compensated Employee will not exceed the targeted contribution limits set forth in Section 3.09(b)(i)(G), or in the case of a corrective contribution that is a Qualified Matching Contribution, the targeted contribution of Section 3.09(a)(ii)(F).

3.12    Duties of Funding Agent Regarding Contributions. The Funding Agent shall receive all contributions paid by the Employer in cash or other property acceptable to the Funding Agent and shall be accountable for all such contributions, but shall have no duty to collect or enforce payment to it of any contributions to the Fund, nor to determine or verify the accuracy thereof.

3.13    Investment Options and Designations.

(a)    All contributions shall be invested in such vehicles as directed by the Participant pursuant to the following provisions of this Plan. Each Participant shall have the right to elect from among one (1) or more separate and distinct investment vehicles designated, from time to time, by the Committee or its delegate, the percentage of his or her allocated contributions which he or she wishes to have invested in each vehicle.

Participants may change the election of an investment vehicle and/or the percentage to be allocated to each option for the investment of new contributions as well as change the allocation of his or her Accounts. Any Participant who fails to specify his or her choice of investment vehicle shall be deemed to have elected to contribute his or her allocated contribution in accordance with the current administrative policy of the Committee or its delegate.

Notwithstanding the foregoing, the Committee or its delegate in a uniform and nondiscriminatory manner may decline to implement, in full or in part, investment instructions submitted by a Participant for a transfer of amounts credited to his or her Accounts into or out of an investment vehicle in the event that the manager of such investment vehicle determines and communicates or has communicated to the Committee or its delegate that such transfers must be restricted to remedy trading activity, trading patterns, or trading practices in such investment vehicle that (i) are not in accordance with the applicable investment vehicle prospectus, (ii) may reasonably be characterized as excessive, (iii) may impose undue costs or administrative burdens on such investment vehicle, (iv) may adversely impact the performance of such investment vehicle, (v) may prevent such investment vehicle from operating in a manner consistent with its investment or administrative guidelines, or (vi) may prevent such investment vehicle from achieving its investment objectives.

(b)    The account balances in the Former ESOP Accounts shall remain invested primarily in Company Stock, provided that Participants are permitted to elect to diversify the manner in which their Former ESOP Accounts are invested at any time. The Committee or its delegate, at its discretion, must make available to the Participants at least three (3) investment options, other than Company Stock, to which Participants may direct the proceeds


of divestment of Company Stock, each of which options is diversified and has materially different risk and return characteristics.

(i)    If a Participant elects to diversify the investment of his or her Former ESOP Account, the Committee or its delegate shall direct the Trustee to transfer the eligible portion of the Participant’s Former ESOP Account from such Account and invest it in accordance with the option selected by the Participant. Investment in the option selected by the Participant shall be made as soon as administratively feasible and no later than ninety (90) days after the option was selected.

(ii)    All voting and tender rights on Company Stock held in the Former ESOP Account of an Employee shall be exercised in accordance with the following provisions:

(A)    As soon as practicable before each annual or special shareholders’ meeting of the Employer, the Trustee shall furnish to each Employee with a Former ESOP Account as of the record date of such meeting a copy of the proxy solicitation material sent generally to shareholders, together with forms requesting confidential instructions on how the Company Stock allocated to such Employee’s Former ESOP Account (including fractional shares to 1/1000th of a share) are to be voted. The Employer and the Trustee shall cooperate to ensure that Employees receive the requisite information in a timely manner. The materials furnished to the Employees shall include a notice from the Committee that any allocated shares of Company Stock for which timely instructions are not received by the Trustee will be voted by the Trustee as directed by the Committee in its discretion. Upon timely receipt of such instructions, the Trustee (after combining votes of fractional shares to give effect to the greatest extent to Employees’ instructions) shall vote the Company Stock as instructed. If voting instructions for Company Stock allocated to any Employee’s Former ESOP Account are not timely received by the Trustee for a particular shareholder’s meeting, such shares shall be voted by the Trustee as directed by the Committee in its discretion. The instructions received by the Trustee from Employees shall be held by the Trustee in strict confidence and shall not be divulged or released to any person including directors, officers or employees of the Employer, or of any other company, except as otherwise required by law.

(B)    With respect to all corporate matters submitted to shareholders, all Company allocated to Employees’ Former ESOP Accounts shall be voted only in accordance with the directions of such Employees in their fiduciary capacity as given to the Trustee. Each Employee shall be entitled to direct the voting of Company Stock (including fractional


shares to 1/1000th of a share) allocated to his Former ESOP Account. With respect to Company Stock allocated to the Former ESOP Account of a deceased Employee, such Employee’s Beneficiary, in its fiduciary capacity, shall be entitled to direct the voting with respect to such allocated Company Stock as if such Beneficiary were the Employee. If, however, voting instructions for Company Stock allocated to any Employee’s Former ESOP Account are not timely received by the Trustee for a particular shareholder’s meeting, such Company Stock shall be voted by the Trustee as directed by the Committee in its discretion.

(C)    Company Stock that is unallocated to any Employee’s Former ESOP Account shall be voted by the Trustee as directed by the Committee in its discretion.

(c)    In the event an offer shall be received by the Trustee (including a tender offer for Company stock subject to Section 14(d)(1) of the Securities Exchange Act of 1934 or subject to Rule 13e-4 promulgated under that Act, as those provisions may from time to time be amended) to purchase or exchange any Company stock held by the Trustee, the Trustee will advise each Employee who has Company stock credited to his Former ESOP Account in writing of the terms of the offer as soon as practicable after its commencement and will furnish each Employee with a form by which he may instruct the Trustee confidentially whether or not to tender or exchange Company stock allocated to his Former ESOP Account and a proportionate share of any unallocated Company stock (including fractional shares to 1/1000th of a share). The materials furnished to the Employees shall include (i) a notice from the Trustee that, the Trustee will not tender or exchange any shares (allocated or unallocated) for which timely instructions are not received by the Trustee and (ii) such related documents as are prepared by any person and provided to the shareholders of the Company pursuant to the Securities Exchange Act of 1934. The Committee and the Trustee may also provide Employees with such other material concerning the tender or exchange offer as the Trustee or the Committee in its discretion determine to be appropriate.

(d)    The ESOP Trustee shall tender or not tender shares allocated to any Employee’s Former ESOP Account only as and to the extent instructed by the Employee. With respect to shares allocated to the Former ESOP Account of a deceased Employee, such Employee’s Beneficiary, shall be entitled to direct the Trustee whether or not to tender or exchange such shares as if such Beneficiary were the Employee. If tender or exchange instructions for shares allocated to any Employee’s Former ESOP Account are not timely received by the Trustee, the Trustee will treat non-receipt as a direction not to tender or exchange such Shares. The instructions received by the Trustee from Employees or Beneficiaries shall be held by the Trustee in strict confidence and shall not be divulged or released to any person, including directors, officers or employees of the Company or of any other company, except as otherwise required by law.



(e)    Each Employee who is entitled to direct the Trustee whether or not to tender or exchange Company stock allocated to his Former ESOP Account shall separately direct the Trustee with respect to the tender or exchange of a portion of the shares of Company stock that are unallocated to any Former ESOP Account. Such direction (treating non-receipt of directions as a direction not to tender or exchange) shall be with respect to such number of unallocated shares multiplied by a fraction, the numerator of which is the number of shares allocated to the Employee’s Former ESOP Account and the denominator of which is the total number of shares allocated to the Former ESOP Accounts of all Employees.

(f)    In the event, under the terms of a tender offer or otherwise, any shares tendered for sale, exchange or transfer pursuant to such offer may be withdrawn from such offer, the Trustee shall follow such instructions respecting the withdrawal of such securities from such offer from the Employees entitled under this Section to give instructions as to the sale, exchange or transfer of securities pursuant to such offer.

(g)    In the event that an offer for fewer than all of the Company stock held by the Trustee is received by the Trustee, each Employee who has been allocated any shares subject to such offer shall be entitled to direct the Trustee as to the acceptance or rejection of such offer with respect to the largest portion of such shares as may be possible given the total number or amount of shares the Trustee may sell, exchange or transfer pursuant to the offer based upon the instructions received by the Trustee from all other Employees who shall timely instruct the Trustee to sell, exchange or transfer such shares pursuant to such offer, each on a pro rata basis.

(h)    The Plan is intended to constitute a plan described in Section 404(c) of ERISA, and the regulations thereunder. As a result, with respect to elections described in the Plan and any other exercise of control by a Participant or his or her Beneficiary over assets in the Participant’s Accounts, such Participant or Beneficiary shall be solely responsible for such actions and neither the Trustee, the Board of Directors, the Committee or its delegate, the Employer, an Investment Manager nor any other person or entity which is otherwise a fiduciary shall be liable for any loss or liability which results from such Participant’s or Beneficiary’s exercise of control.

(i)    Participants may not elect to transfer any portion of their account balances from other investment options into the Former ESOP Account. The general types of investment options available to Participants are described in paragraph (a) of Section 3.13.

3.14    Participant Accounts.

(a)    Individual Accounts. The Committee or its delegate shall establish and maintain a Regular Account, a Tax-Deferred Contributions Account, a Roth Contributions Account and when applicable, a Voluntary Contributions Account, Former ESOP Account, Tax-Deferred Rollover Contributions Account, Roth Rollover Contributions Account, and In-Plan Roth Conversion Account in the name of each Participant.



(b)    Valuation of Accounts. The value of the Accounts invested in the investment vehicles shall be established on each business day by the Investment Manager, and investment gains and losses shall be allocated to such Accounts according to the investment elections of Participants.

(c)    Accounts in General. The Employer, the Funding Agent and the Committee or its delegate do not in any manner or to any extent whatever warrant, guarantee or represent that the value of any Participant’s Accounts will at any time equal or exceed the amount previously allocated thereto and, except as provided in ERISA, shall not be liable or responsible for any inadequacy of the Fund to meet and discharge any or all payments and liabilities under the Plan.

3.15    In-Plan Roth Transfers . A Participant (or Beneficiary or alternate payee, if applicable) may elect a transfer of vested Tax-Deferred Contributions, Employer Contributions, Tax-Deferred Rollover Contributions Account, and Voluntary Contributions, in each case that are not Roth Contributions, and convert such amounts to Roth status by means of an In-Plan Roth conversion transfer pursuant to Code Section 402A(c)(4), to be held in the In-Plan Roth Conversion Account, subject to the following:

(a)    Notwithstanding anything herein to the contrary, if any portion of a Participant’s Account is subject to an outstanding loan pursuant to Section 7.04, such Account is not eligible for In-Plan Roth conversion under this Section 3.15.

(b)    A Participant may elect the transfer of any vested amount designated by the Participant from the Participant’s Tax-Deferred Contributions Account and/or Employer Contribution to an In-Plan Roth Conversion Account. Amounts shall not be distributed from an In-Plan Roth Conversion Account except as would be permitted for Tax-Deferred Contributions.

(c)     A Participant may elect the transfer of any vested amount designated by the Participant from the Participant’s Tax-Deferred Rollover Contributions Account to an In-Plan Roth Conversion Account. Amounts shall not be distributed from an In-Plan Roth Conversion Account except as would be permitted for Tax-Deferred Rollover Contributions.

(d)    A Participant may elect transfer of any amount designated by the Participant from the Participant’s Voluntary Contributions Account to an In-Plan Roth Conversion Account. Amounts shall not be distributed from an In-Plan Roth Conversion Account except as would be permitted from the Participant’s Voluntary Account.

(e)    Following the death of the Participant, each of his or her spousal Beneficiaries shall have the right to elect any of the transfers described above with respect to the Participant’s Accounts held on behalf of the Beneficiary. A spousal “alternate payee” pursuant to the terms of a qualified domestic relations order shall have the right to elect any of the transfers described above with respect to the Participant’s Accounts held on behalf of the spousal alternate payee after the order is determined to be qualified.



(f)    All elections under this Section 3.15 shall be filed with the Committee or its delegate in such a form and manner as prescribed by the Committee or its delegate.

(g)    Because no income tax withholding will occur with respect to the taxable income resulting from the in-Plan Roth transfers and amounts held in the In-Plan Roth Conversion Account, the Participant (or Beneficiary or alternate payee, if applicable) shall be responsible for payment of all income taxes due.

3.16    Leveraged ESOP Provisions

(a)    Acquisition Loans. The Employer or the Committee may direct the Trustee to incur Acquisition Loans from time to time to finance the acquisition of Leveraged Shares or to repay a prior Acquisition Loan. For purposes of this Section, “Acquisition Loan” shall mean a loan or other extension of credit described in Code Section 4975(d)(3) which is used to finance the purchase of stock by the Trustee or any refinancing thereof. Any Acquisition Loan shall meet the requirements of Section 54.4975-7(b) of the Treasury Regulations and shall be primarily for the benefit of Participants and their Beneficiaries. Accordingly, at the time any Acquisition Loan is made, the interest rate for the Acquisition Loan and the price of the Leveraged Shares to be acquired shall not be such that Plan assets might be drained off. The proceeds of any Acquisition Loan shall be used within a reasonable time only to finance the acquisition of Leveraged Shares or to repay a prior Acquisition Loan, and the use of such proceeds shall in all events comply with Section 54.4975-7(b)(4) of the Treasury Regulations. For purposes of this Section, “Leveraged Shares” shall mean shares of Company Stock acquired by the Trustee with the proceeds of an Acquisition Loan. pursuant to Section 4.2. Except as required by Code Section 409(h) and by Treasury Regulation Sections 54.4975-7(b)(9), (10), or as otherwise required by applicable law, no Leveraged Shares may be subject to a put, call or other option, or buy-sell or similar arrangement while held by, and when distributed from, the Plan, whether or not the Plan is an employee stock ownership plan, within the meaning of Code Section 4975(e)(7), at that time. Any Acquisition Loan shall be for a specific term, shall bear a reasonable rate of interest, and shall not be payable on demand except in the event of default. In the event of default under an Acquisition Loan, the value of Trust assets transferred in satisfaction of any Acquisition Loan shall not exceed the amount of the default. If the lender is a “disqualified person” within the meaning of Section 4975(e)(2) of the Code or “party in interest” within the meaning of Section 3(14) of ERISA, a transfer of Trust assets upon default shall be made only upon and to the extent of the failure of the Plan to meet the payment schedule of the loan. Any Acquisition Loan may be secured by collateral pledge of the Leveraged Shares so acquired. No other Trust assets may be pledged as collateral for an Acquisition Loan, and no lender shall have recourse against Trust assets other than any Leveraged Shares remaining subject to pledge. Any pledge of Leveraged Shares must provide for the release of shares so pledged on a pro rata basis as principal and interest on the Acquisition Loan is repaid by the ESOP Trustee and


such Leveraged Shares are allocated to Participants’ Accounts as provided under Section 4.3. Repayments of principal and interest on any Acquisition Loan shall be made by the Trustee (as directed by the Employer) only from Contributions paid in cash to enable the Trustee to repay such Acquisition Loan, from earnings attributable to such contributions, from any collateral given for the Acquisition Loan, and from any cash dividends paid on Stock acquired with the proceeds of the Acquisition Loan (whether or not allocated to the Participants’ Accounts). The terms of any Acquisition Loan, and the repayment of principal and interest thereon, shall in all events comply with Section 54.4975-7(b)(5) of the Treasury Regulations. In acquiring Leveraged Shares, the ESOP Trustee shall pay no more than “adequate consideration” (as defined in Section 3(18) of ERISA).

3.17    Release of Stock From Loan Suspense Account.

(a)    For each Plan Year during which there are Leveraged Shares in the Loan Suspense Account, the Employer shall make contributions in an amount sufficient to enable the Trustee to pay any currently maturing obligation under an Acquisition Loan, without regard to the accumulated earnings and profits of the Employer. For purposes of this Section, “Loan Suspense Account” shall mean the account under which Leveraged Shares are held until released for allocation pursuant to Section 4.3.

(b)    Any Leveraged Shares shall initially be credited to the Loan Suspense Account and shall be allocated to Participants’ Accounts only as payments of principal and interest on the Acquisition Loan used to purchase such Leveraged Shares are made by the ESOP Trustee. The number of Leveraged Shares to be released from the Loan Suspense Account as soon as practicable following any amortization of an Acquisition Loan shall equal the number of Leveraged Shares in the Loan Suspense Account immediately before release multiplied by a fraction. The numerator of the fraction shall be the amount of Contributions and any dividends on Stock which are applied to the payment of principal and interest on the Acquisition Loan during the applicable period. The denominator of the fraction shall be the sum of the numerator plus the principal and interest to be paid for all future periods over the duration of the Acquisition Loan repayment period. For purposes of computing the denominator of the fraction referred to above, if the interest rate on the Acquisition Loan is variable, the interest to be paid in subsequent periods shall be calculated by assuming that the interest rate in effect as of the date of amortization and release from the Loan Suspense Account will be the interest rate in effect for the remainder of the term of the Acquisition Loan. Notwithstanding the foregoing, in the event such Acquisition Loan shall be repaid with the proceeds of a subsequent Acquisition Loan (“Substitute Loan”), such repayment shall not operate to release all such Shares from the Loan Suspense Account, but, rather, such release shall be effected pursuant to the foregoing provisions of this Section on the basis of payments of principal and interest on such Substitute Loan.

(c)    If permitted by the Employer pursuant to a one-time irrevocable designation (which shall be made, if at all, upon the making of an


Acquisition Loan) by the Board of Directors, then, in lieu of applying the foregoing provisions with respect to an Acquisition Loan, Shares shall be released from the Loan Suspense Account as the principal amount of such Acquisition Loan is repaid (without regard to interest payments) provided the following three conditions are satisfied:

(i)    The Acquisition Loan shall provide for annual payments of principal and interest at a cumulative rate that is not less rapid at any time than level annual payments of such amounts for ten (10) years;

(ii)    The interest portion of any payment shall be disregarded only to the extent it would be treated as interest under standard loan amortization tables; and

(iii)    If the Acquisition Loan is renewed, extended or refinanced, the sum of the expired duration of the Acquisition Loan and the renewal, extension or new Acquisition Loan shall not exceed ten (10) years.

(d)    If at any time there is more than one (1) Acquisition Loan outstanding, then separate accounts shall be established under the Loan Suspense Account for each such Acquisition Loan. Each Acquisition Loan for which a separate account is maintained shall be treated separately for purposes of the provisions governing the release of Shares from the Loan Suspense Account under this Section.

(e)    As soon as practicable following the release of Leveraged Shares from the Loan Suspense Account as a result of a loan amortization payment, a portion of the total number of Shares so released shall be allocated to Participants’ Former ESOP Accounts based on the amounts of any dividends on Stock used to make the loan amortization payment. The portion so released shall be separately calculated with respect to (i) cash dividends on Stock held in Participants’ Accounts (the “Allocated Dividends”) and (ii) dividends on Stock held in the Loan Suspense Account (the “Unallocated Dividends”). Stock released for the benefit of Participants who would have otherwise been credited with the value of Allocated Dividends shall have a fair market value not less than the amount of such Allocated Dividends. The allocation of the value of Stock released shall be allocated in the same proportion that the value of Allocated Dividends used for payment of the Acquisition Loan would have been allocated.

(f)    As soon as practicable following each Plan Year, all Leveraged Shares that have been released from the Loan Suspense Account as a result of loan amortization payments made during such ESOP Allocation Period that have not and will not be allocated pursuant to Subsection (e) shall be allocated to the Former ESOP Account of each person who is credited with at least 1000 Hours of Service during the Plan Year and who is a Participant on the last day of the applicable period, an amount equal to that portion of the total allocable amount that the Participant’s Compensation


during the period bears to the total Compensation of all such Participants during the period.

3.18    Dividends on Company Stock.

(a)    All cash dividends on Company stock allocated to Employees Former ESOP Accounts may, as determined by the Committee, be used in whole or in part, consistent with Section 404(k) of the Code, to (1) make principal or interest payments on an Acquisition Loan, or (2) be made subject to the election of the Employees or, if applicable, their Beneficiaries (“Participant’s Election”). Where the Committee determines that dividends shall be subject to the Participant’s Election, the dividends shall be paid to the Plan and reinvested in Company stock, except for dividends allocated to any Employee or, if applicable, Beneficiary who elects that such dividends shall be distributed by the Plan in cash. Such Participant’s Election shall be made in a manner prescribed by the Committee (which may include a designation through electronic media in accordance with the provisions of the Plan).

(b)    An Employee or Beneficiary may make or change his Participant’s Election at any time between January 1 and February 15, inclusive, of each Plan Year. If an Employee or Beneficiary does not timely and affirmatively make a Participant’s Election to receive dividends in cash by February 15 of such Plan Year, dividends paid to the Plan during such Plan Year and allocated to such Employee or Beneficiary shall be reinvested in Company stock. Notwithstanding the preceding sentence, with respect to any Employee or Beneficiary, if such person had a Participant’s Election to receive dividends in cash that was effective for the immediately preceding Plan Year in which a Participant’s Election was available, such Participant’s Election shall continue to be effective for the current Plan Year unless such person timely and affirmatively makes a Participant’s Election to reinvest dividends in Company stock for the current Plan Year. After February 15 of each Plan Year, the Participant’s Election (including a failure to make an affirmative election or change a previously-made election) shall become irrevocable for the remainder of such Plan Year.

(c)    If an Employee or Beneficiary makes a Participant’s Election to receive a distribution of dividends in cash, such distribution shall be made to such Employee or Beneficiary no later than ninety (90) days after the close of the Plan Year in which the dividend is paid to the Plan. Notwithstanding any other provision of this Plan, an Employee or Beneficiary shall be fully vested in any dividend subject to a Participant’s Election, regardless of whether the Employee or Beneficiary elects a cash distribution or reinvestment with respect to such dividend.

(d)    The Committee may determine how such dividends may be applied for any Plan Year up to the time when such dividends are finally allocated to the Accounts of Employees as of the last day of the Plan Year. Such dividends may not be used for payment of an Acquisition Loan unless Company stock released for the benefit of Employees who would have otherwise been credited with the value of such dividends has a fair market


value not less than the amount of such dividends which would have been otherwise allocated for the benefit of the Employee for the Plan Year. The allocation of the value of Company stock released pursuant to this Section shall be allocated to Employees in the same proportion that the value of dividends used for payment of the Acquisition Loan would have been allocated for the benefit of such Employees. All cash dividends on Leveraged Shares that are not allocated to any Employee’s Former ESOP Account shall be used to repay an Acquisition Loan related to such shares and the Leverage Shares released from the Loan Suspense Account due to such repayment shall be allocated as described herein.











































ARTICLE IV
MAXIMUM CONTRIBUTIONS AND BENEFIT LIMITATIONS

4.01     Limitation on Annual Additions. Notwithstanding any other provisions of the Plan, and except to the extent permitted under Code Section 414(v) and Section 3.03(b) of the Plan (in regard to catch-up contributions), the total Annual Additions under this Plan and any other defined contribution plan, as defined in Code Section 414(i), maintained by the Employer or any Affiliated Employer, to a Participant’s Accounts for any limitation year shall not exceed the lesser of:

(a)    $72,000 (for 2026), as adjusted for increases in the cost-of-living under Code Section 415(d); or

(b)    One hundred percent (100%) of the Participant’s Compensation, within the meaning of Code Section 415(c)(3) for the limitation year.

4.02    Excess Annual Additions. Any Annual Additions which exceed the limit of Section 4.01 shall be held in an unallocated account or distributed to the Participant in accordance with Revenue Procedure 2024-80 or any superseding guidance. Notwithstanding any other provision in the Plan to the contrary, the final Treasury Regulations under Code Section 415, printed in the Federal Register on April 5, 2007, are hereby incorporated by reference and supersede any inconsistent provision of the Plan. Accordingly, no Annual Additions credited to a Participant’s Account shall exceed the limitations set forth in Code Section 415(c).

4.03    “Annual Additions” Defined.

(a)    The term “Annual Addition” means, with respect to each Participant for the Plan Year, the aggregate of:

(i)    Contributions made by the Employer (including Tax-Deferred Contributions and Roth Contributions) and forfeitures (except as otherwise specified in Code Section 415(c)(6) for an employee stock ownership plan that satisfies certain nondiscrimination requirements) allocated to the Participant’s Accounts under this Plan and any other defined contribution plan, as defined in Code Section 414(i), maintained by the Employer or an Affiliated or Non-Affiliated Employer for the Plan Year;

(ii)    Voluntary Contributions, if any, for the Plan Year;

(iii)    Excess Contributions and Excess Aggregate Contributions, as those terms are defined under Section 3.10(a), for such year which are distributed in accordance with Section 3.10; and

(iv)    Contributions allocated on the Employee’s behalf to any individual medical account as defined in Code Section 415(l)(2) which is part of a pension or annuity plan or which are attributable to post-retirement medical benefits under a welfare benefit fund as defined in Code Section 419(e).

(b)    The term “Annual Additions” shall not include:



(i)    Amounts from a direct transfer of a benefit or employee contributions from a qualified plan to this Plan;

(ii)    Rollover contributions (as described in Code Sections 401(a)(31), 402(c)(1), 403(a)(4), 403(b)(8), 408(d)(3), and 457(e)(16));

(iii)    Repayments of loans made to a Participant from the Plan;

(iv)    Repayments of amounts described in Code Section 411(a)(7)(B) (in accordance with Code Section 411(a)(7)(C)) and Code Section 411(a)(3)(D) or repayment of contributions to a governmental plan (as defined in Code Section 414(d)) as described in Code Section 415(k)(3), as well as Employer restorations of benefits that are required pursuant to such repayments; or

(v)    Restorative payments;

(A)    The term “restorative payments” means a payment made to restore losses to a Plan resulting from actions by a fiduciary for which there is reasonable risk of liability for breach of a fiduciary duty under ERISA or under other applicable federal or state law, where Participants who are similarly situated are treated similarly with respect to the payments. Generally, payments are restorative payments only if the payments are made in order to restore some or all of the Plan's losses due to an action (or a failure to act) that creates a reasonable risk of liability for such a breach of fiduciary duty (other than a breach of fiduciary duty arising from failure to remit contributions to the Plan). This includes payments to a plan made pursuant to a Department of Labor order, the Department of Labor's Voluntary Fiduciary Correction Program, or a court‑approved settlement, to restore losses to a qualified defined contribution plan on account of the breach of fiduciary duty (other than a breach of fiduciary duty arising from failure to remit contributions to the Plan). Payments made to the Plan to make up for losses due merely to market fluctuations and other payments that are not made on account of a reasonable risk of liability for breach of a fiduciary duty under ERISA are not restorative payments and generally constitute contributions that are considered Annual Additions.

(vi)    A Participant’s repayment of a Qualified Birth or Adoption Distribution;

(vii)    A Participant’s repayment of a Domestic Abuse Victim Distribution;

(viii)    A Participant’s repayment of an Emergency Personal Expense Distribution;



(ix)    A Participant’s repayment of a Qualified Disaster Recovery Distribution; or

(x)    A Participant’s repayment of a Terminal Illness Distribution.

4.04    Aggregation and Disaggregation of Plans. For purposes of applying the limitations of Code Section 415, all defined contribution plans (without regard to whether a plan has been terminated) ever maintained by the Employer (or a Predecessor Employer) under which the Participant receives Annual Additions are treated as one defined contribution plan. The “Employer” means the Employer that adopts this Plan and all members of a controlled group or an affiliated service group that includes the Employer (within the meaning of Code Section 414(b), (c), (m) or (o)), except that for purposes of this Section, the determination shall be made by applying Code Section 415(h), and shall take into account tax‑exempt organizations under Regulation Section 1.414(c)‑5, as modified by Regulation Section 1.415(a)-1(f)(1).

(a)    Break‑up of an affiliate employer or an affiliated service group. For purposes of aggregating plans for Code Section 415, a “formerly affiliated plan” of an employer is taken into account for purposes of applying the Code Section 415 limitations to the employer, but the formerly affiliated plan is treated as if it had terminated immediately prior to the “cessation of affiliation.” For purposes of this paragraph, a “formerly affiliated plan” of an employer is a plan that, immediately prior to the cessation of affiliation, was actually maintained by one or more of the entities that constitute the employer (as determined under the employer affiliation rules described in Regulation Section 1.415(a)‑1(f)(1) and (2)), and immediately after the cessation of affiliation, is not actually maintained by any of the entities that constitute the employer (as determined under the employer affiliation rules described in Regulation Section 1.415(a)‑1(f)(1) and (2)). For purposes of this paragraph, a “cessation of affiliation” means the event that causes an entity to no longer be aggregated with one or more other entities as a single employer under the employer affiliation rules described in Regulation Section 1.415(a)‑1(f)(1) and (2) (such as the sale of a subsidiary outside a controlled group), or that causes a plan to not actually be maintained by any of the entities that constitute the employer under the employer affiliation rules of Regulation Section 1.415(a)‑ 1(f)(1) and (2) (such as a transfer of plan sponsorship outside of a controlled group).

(b)    Midyear Aggregation. Two or more defined contribution plans that are not required to be aggregated pursuant to Code Section 415(f) and the Treasury Regulations thereunder as of the first day of a limitation year do not fail to satisfy the requirements of Code Section 415 with respect to a Participant for the limitation year merely because they are aggregated later in that limitation year, provided that no Annual Additions are credited to the Participant's Accounts after the date on which the plans are required to be aggregated.









ARTICLE V
TOP HEAVY PROVISIONS
5.01    Top Heavy Provisions. The following provisions shall be interpreted in accordance with Code Section 416 and the regulations thereunder:

(a)    Definitions. For purposes of this Article V, the following terms shall have the meanings set forth below:

(i)    “Determination Date” means the last day of the preceding Plan Year or, in the case of the first Plan Year of the Plan, the last day of the Plan Year.

(ii)    “Key Employee” means any Employee who, during the Plan Year containing the Determination Date, is:

(A)    A 5% Owner of the Employer;

(B)    A 1% owner of the Employer who has Code Section 415 Compensation above $150,000; or

(C)    An officer of the Employer having Code Section 415 Compensation greater than $235,000 (as adjusted under Code Section 416(i)(1)(A)), provided that no more than the lesser of:
(1)    Fifty (50) Employees; or

(2)    The greater of three (3) Employees or ten percent (10%) of the Employer’s Employees shall be treated as officers.

(iii)    “Non-Key Employee” shall mean each Employee who is not a Key Employee.

(b)    Top Heavy Definition. The Plan shall be ‘Top Heavy’ for any Plan Year if, as of the Determination Date, the ‘top heavy ratio’ exceeds sixty percent (60%). The top-heavy ratio is the sum of the Regular Accounts, Voluntary Contributions Accounts, if any, Roth Contribution Accounts and Tax-Deferred Contributions Accounts for all Employees who are Key Employees divided by the sum of the Regular Accounts, Voluntary Contributions Accounts, if any, Roth Contribution Accounts and Tax-Deferred Contributions Accounts for all Employees. For purposes of this calculation only, the following rules shall apply:

(i)    The present values of the accrued benefits and the amounts of Account balances of an Employee as of the Determination Date shall be increased by the distributions made with respect to the Employee under the Plan and any plan aggregated with the Plan under Code Section 416(g)(2) during the 1-year period ending on the Determination Date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under Code Section 416(g)(2)(A)(i). In the case of a distribution made for a reason other than Severance from Employment, death, or Total and


Permanent Disability, this provision shall be applied by substituting “5-year period” for “1-year period.”

(ii)    Employees not performing services during year ending on the Determination Date. The accrued benefits and Accounts of any individual who has not performed services for the Employer during the 1-year period ending on the Determination Date shall not be taken into account.

(iii)    The required aggregation group shall consist of any plans (including terminated plans where required by Code Section 416(g)(3)) qualified under Code Section 401(a) in which a Key Employee participates or which enables this Plan to meet the requirements of Code Sections 401(a)(4) or 410.

(iv)    The permissive aggregation group shall consist of the required aggregation group plus any other plan to the extent that such plan, when so aggregated, continues to meet the requirements of Code Sections 401(a)(4) and 410.

(v)    Unless the Plan qualifies under an exception as described in Code Section 416(h)(2), “1.0” shall be substituted for “1.25” in the definitions of Defined Benefit Plan fraction and Defined Contribution Plan fraction contained in this Plan.

(vi)    Solely for the purpose of determining if the Plan, or any other plan included in a required aggregation group of which this Plan is a part, is Top Heavy (within the meaning of Code Section 416(g)), the accrued benefit of an Employee other than a Key Employee (within the meaning of Code Section 416(g)) shall be determined under (i) the method, if any, that uniformly applies for accrual purposes under all plans maintained by the Affiliated Employers, or (ii) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional accrual rule of Code Section 411(b)(l)(C).

(c)    Minimum Contribution Requirement.

(i)    If the Employer does not maintain a qualified defined benefit retirement plan, or does maintain such a plan but each Non-Key Employee does not accrue the minimum benefit thereunder required by Code Section 416, the Employer Contributions, if any, for any such Plan Year shall be allocated on the basis of each Participant’s Code Section 415 Compensation in such manner as may be prescribed by the Code or any pertinent regulations promulgated thereunder as will result in each Non-Key Employee receiving an allocation hereunder of the amount which, when added to the amount allocated to his or her Regular Account or any amount allocated pursuant to Code Section 401(k) under this or any other qualified defined contribution retirement plan maintained by the Employer for such Year, will at least equal the lesser of:



(A)    Three percent (3%) of his or her Code Section 415 Compensation;

(B)    The highest percentage computed by dividing the amount of the Employer Contributions so allocated to each Key Employee’s Accounts (including amounts contributed as the result of a salary reduction agreement) by his or her Code Section 415 Compensation; or

(B)    The amount otherwise required after any credit against or reduction of the minimum amounts described in clauses (A) or (B) allowable for benefits accrued under any such defined benefit plan.

Non-Key Employees entitled to the minimum percentage contribution set forth in clause (A) or (B) shall also include Participants who have not incurred a Break in Service at the end of the Plan Year and Eligible Employees who declined to make Tax-Deferred Contributions and Roth Contributions to the Plan but must be considered as Participants to satisfy the coverage requirements of Code Section 410(b) in accordance with Code Section 401(a)(5) even if such Participants or Eligible Employees have earned less than one thousand (1,000) Hours of Service and regardless of their level of Compensation. However, if the Employer maintains any other qualified defined benefit retirement plan and this Plan is aggregated therewith for purposes of meeting the requirements of Code Sections 401(a)(4) or 410, the minimum amount described in clause (B) shall not be applicable. Further, if the Employer maintains any other qualified defined benefit plan for purposes of providing the additional benefits permissible by Code Section 415, and each Non-Key Employee does not accrue the minimum benefit thereunder required by Code Section 416, then the percentage set forth in clause (A) hereinabove shall be deemed to be five percent (5%).

(ii)    Matching Contributions shall be taken into account for purposes of satisfying the minimum contribution requirements of Code Section 416(c)(2) and the Plan. The preceding sentence shall apply with respect to Matching Contributions under the Plan or, if the Plan provides that the minimum contribution requirement shall be met in another plan, such other plan. Matching Contributions that are used to satisfy the minimum contribution requirements shall be treated as Matching Contributions for purposes of the ACP test (as defined under Section 3.09(a)) and other requirements of Code Section 401(m).

(iii)    The Employer may provide that the minimum benefit requirement shall be met in another plan (including another plan that consists solely of a cash or deferred arrangement which meets the requirements of Code Section 401(k)(12) and matching contributions with respect to which the requirements of Code Section 401(m)(11) are met).


(d)    Top Heavy Vesting. If this Plan is determined to be Top Heavy in any Plan Year, the vesting schedule specified in Section 6.01 of the Plan shall continue to apply.


















































ARTICLE VI
VESTING

6.01    Vesting. The interest of each Participant in his or her Tax-Deferred Contributions Account, Roth Contributions Account, Voluntary Contributions Account, Tax-Deferred Rollover Contributions Account, Roth Rollover Contributions Account, and In-Plan Roth Conversion Account, shall be, at all times, one hundred percent (100%) vested and nonforfeitable. The interest of each Participant in his or her Regular Account and Former ESOP Account shall vest as follows:

Years of Vesting ServiceVested
Percentage
Less than 2 years0%
2 or more years100%

(a)    If a Participant incurs a Period of Severance of sixty (60) consecutive months or more before he or she has a vested interest, his or her Years of Vesting Service completed prior to such Period of Severance shall be taken into account if, and only if, the Period of Severance following his or her Severance from Employment is less than the Participant’s Period of Service completed prior to his or her Severance from Employment.

(b)    If a Participant incurs a Severance from Employment which is followed by a Period of Severance of sixty (60) consecutive months or more and he or she subsequently has a Reemployment Commencement Date, no Year of Vesting Service after such Period of Severance shall be taken into account in determining the vested percentage in a Participants Regular Account and Former ESOP Account accrued up to his or her Severance from Employment.

(c)    For purposes of determining the vested percentage of a Participant who was formerly employed by an Acquired Employer, Years of Vesting Service shall include the Employee’s Period of Service with the Acquired Employer; provided, however, that an Employee’s Period of Service with an entity that was formerly an Acquired Entity on and after the date the entity ceases to be an Affiliated Employer shall not be included in such Participant’s Years of Vesting Service for purposes of determining the Participant’s vested percentage.

(d)    A Participant shall become one hundred percent (100%) vested in his or her Regular Account and Former ESOP Account upon death, Total and Permanent Disability, or attaining Normal Retirement Age before a Severance of Employment. If a Participant is hired or rehired after attaining his or her Normal Retirement Age, his or her Account shall be one hundred percent (100%) vested.

If the Plan should ever be amended to change the vesting schedule thereunder, then each Participant’s vested percentage in his or her Regular Account or Former ESOP Account as of the later of the date such amendment is adopted or the date it becomes effective, shall be, at any time, not less than his or her vested percentage computed under the Plan without regard to such amendment.


6.02    Forfeitures.

(a)    The non-vested portion of a Participant’s Account shall be forfeited on or following the earlier of:

(i)    The date as of which the Participant receives a distribution of the vested portion of his or her Account on account of his or her termination of employment; or

(ii)    The date which is the close of a Period of Severance of sixty (60) consecutive months.

For the purposes of this Section 6.02, if a Participant is zero percent (0%) vested in his or her Regular Account, the Participant shall be deemed to have received a distribution of the vested portion of his or her Account. If such Participant resumes employment with the Employer before the close of a Period of Severance of sixty (60) consecutive months, the amount forfeited shall be restored to the Participant’s Account.

(b)    Forfeitures shall first be applied to reduce Plan expenses, and the remainder, if any, shall be applied to reduce Employer Contributions and shall be allocated as provided pursuant to Sections 3.01 and 3.02.

(c)    If a Participant receives a total distribution of his or her Accounts and is reemployed before the close of a Period of Severance of sixty (60) consecutive months, any amounts forfeited shall be reinstated (unadjusted for any gains or losses occurring after such forfeitures) to his or her Regular Account within a reasonable time after such Participant repays the amount of any distribution he or she may have received pursuant to Sections 7.08 or 7.09. Such repayment must be made before the earlier of the date which is five (5) years after the date on which the Participant is subsequently reemployed by the Employer or the date which is the close of a Period of Severance of sixty (60) consecutive months commencing after a distribution or withdrawal. If a Participant does not receive a total distribution of his or her Accounts, the amount forfeited shall be reinstated if the Participant is reemployed whether or not the Participant repays the amount of distribution he or she may have received.


















ARTICLE VII
DISTRIBUTIONS

7.01    Spousal Consent. The Plan shall not require spousal consent for distributions or loans paid to Participants, unless otherwise required pursuant to Section 2.07.

7.02    Age 59 ½ In-Service Withdrawals. If a Participant has attained age fifty-nine and one-half (59½), all amounts that have been allocated to the Participant’s Accounts may be withdrawn by the Participant upon request to the Committee on approved forms subject to the restrictions set forth below:

(a)    Other Rights and Restrictions.

(i)    Former ESOP Account. In addition to any rights granted to former ESOP Participants in Section 3.13(b), a Participant may elect to withdraw a contribution made to the Former ESOP Account portion of his or her Regular Account in the fifth (5th) Plan Year following the Plan Year for which the contribution was made. The election shall occur in the fifth (5th) Plan Year following the Plan Year for which the contribution was made and shall be made on a written form prescribed or approved by the Committee no later than thirty (30) days prior to the end of the fifth (5th) Plan Year following the Plan Year for which the Contribution was made. Distribution shall occur as soon as practicable following the end of the fifth (5th) Plan Year. The Valuation Date of the benefits attributed to the contribution shall be the last day of the fifth (5th) Plan Year.

As an alternative to withdrawal, a Participant may also elect to cash out the shares of Company Stock. The funds received as a result of the cash-out will be transferred out of the Former ESOP Account sub-account of the Regular Account and may be reinvested in any other investment option available under the Plan. The benefits which are not withdrawn or cashed out shall be retained in the Participant’s Former ESOP Account. The benefits which are not withdrawn or cashed out shall be retained in the Participant’s Former ESOP Account.

(ii)    Regular Account, Tax-Deferred Contributions Account, Roth Contributions Account and/or In-Plan Roth Conversion Account. A Participant may withdraw amounts from the Participant’s Regular Account, Tax-Deferred Contributions Account, Roth Contributions Account and/or In-Plan Roth Conversion Account prior to termination only if the Participant has attained age fifty-nine and one-half (59½) and no more than one (1) time per any given ninety (90) day period. The minimum amount of each withdrawal shall be at least five hundred dollars ($500). No more than four (4) withdrawals can be made each Plan Year.

(iii)    Voluntary Contributions Account, Tax-Deferred Rollover Contributions Account and/or Roth Rollover Contributions Account. A Participant may make in-service withdrawals from his


or her Voluntary Contributions Account, Tax-Deferred Rollover Contributions Account and/or Roth Rollover Contributions Account at any time (i.e., both before and after attaining age fifty-nine and one-half (59½)), and no more than one (1) time per any given ninety (90) day period. The minimum amount of each withdrawal shall be at least five hundred dollars ($500). No more than four (4) withdrawals may be made each Plan Year.

(b)    Suspension of Distributions. Notwithstanding any other provision of the Plan, the payment of benefits hereunder to a former Participant who returns to the employ of the Employer after incurring a Break in Service shall be suspended for the period until such reemployment.

7.03    Hardship Distribution. A Participant may take a distribution in an amount not to exceed the value of his or her Tax-Deferred Contributions Account, Roth Contributions Account, Voluntary Contributions Account, In-Plan Roth Conversion Account, Tax-Deferred Rollover Contributions Account, Roth Rollover Contributions Account, and Employer Contributions (excluding Former ESOP Account), as applicable and including earnings, as of the date immediately preceding the date of the Participant’s accepted application for hardship withdrawal, on account of hardship if the distribution is necessary in light of immediate and heavy financial need of such Participant, determined in accordance with Code Section 401(k)(2)(B)(i)(IV) and regulations issued thereunder. In no event shall such distribution include any Employer Contributions which was recharacterized or eligible to be recharacterized to enable the Plan to meet the requirements of the ADP test in Section 3.09(b). Hardship distributions will not be treated as necessary to satisfy an immediate and heavy financial need of an Employee to the extent the amount of the distribution is in excess of the amount required to relieve the financial need or to the extent such need may be satisfied from other resources that are reasonably available to the Participant.

(a)    In order to receive a distribution under this Section 7.03, a Participant shall be required to submit their request and appropriate supporting documentation to the Committee or its delegate. The Committee or its delegate shall be entitled to rely on the truthfulness of facts and documents set forth by the Participant in this submission without the need for independent certification unless the Committee or its delegate has knowledge to the contrary.

(b)    The Committee or its delegate shall deem a distribution to be necessary if all of the following requirements are satisfied:

(i)    The distribution is not in excess of the amount of the immediate and heavy financial need of the Participant, including the amount necessary to pay income taxes or penalties resulting from the distribution;

(ii)    The Participant has obtained all distributions, other than hardship distributions and loans, currently available under all plans maintained by the Employer; and

(iii)    Unless otherwise allowed by the appropriate income tax regulations, a distribution under the Plan is hereby deemed to be on account of an immediate and heavy financial need of an Employee


if the distribution is for one of the following or any other item permitted under Treasury Regulation Section 1.401(k)-1(d)(3)(iii)(B):

(A)    Expenses for (or necessary to obtain) medical care for the Employee, the Employee’s Spouse, children or dependents (as defined in Code Section 152 without regard to Code Section 152(b)(1), (b)(2), and (d)(1)(B)) that would be deductible under Code Section 213(d) (determined without regard to whether the expenses exceed 7.5% of adjusted gross income);

(B)    Costs directly related to the purchase of a principal residence for the Employee (excluding mortgage payments);

(C)    Payment of tuition, related educational fees, and room and board expenses, for up to the next twelve (12) months of post-secondary education for the Employee, the Employee’s Spouse, children, or dependents (as defined in Code Section 152 without regard to Code Section 152(b)(1), (b)(2), and (d)(1)(B));

(D)    Payments necessary to prevent the eviction of the Employee from the Employee’s principal residence or foreclosure on the mortgage on that residence;

(E)    Payments for burial or funeral expenses for the Employee’s deceased parent, Spouse, children or dependents (as defined in Code Section 152 without regard to Code Section 152(d)(1)(B));

(F)    Expenses for the repair of damage to the Employee’s principal residence that would qualify for the casualty deduction under Code Section 165 (determined without regard to Code Section 165(h) or whether the loss exceeds 10% of adjusted gross income); or

(G)    Expenses and losses (including loss of income) incurred by the Employee on account of a disaster declared by the Federal Emergency Management Agency (FEMA), provided that the Employee’s principal residence or principal place of employment at the time of the disaster was located in an area designated by FEMA for individual assistance with respect to the disaster.

(c)    A Participant will only be allowed to request a maximum of two (2) withdrawals under this Section 7.03 every three hundred and sixty-five (365) days and must be for an amount not less than $500.00.

(d)    A Participant’s hardship event, for purposes of the Plan’s safe harbor hardship distribution provisions pursuant to Treasury Regulation Section


1.401(k)‑1(d)(3)(iii)(B), includes an immediate and heavy financial need of the individual named as the Participant’s primary Beneficiary under the Plan, that would constitute a hardship event if it occurred with respect to the Participant’s Spouse or dependent as defined under Code Section 152 (such hardship events being limited to educational expenses, funeral expenses and certain medical expenses).

(e)    Only Participants who are actively employed shall be permitted to take hardship withdrawals under this Section 7.03.

7.04    Loans. The Plan will permit Participant loans if, and to the extent, the Committee or its delegate adopts a “Loan Policy,” and sets forth such policy in a separate written document.

7.05    Benefits Upon Severance From Employment.

(a)    Distribution of a Participant’s Accounts payable on account of a Participant attaining Normal Retirement Age or Severance of Employment will be made or commenced as soon as administratively feasible; provided, however, that if the Participant fails to consent to an immediate distribution, failure to so consent shall be construed as an election to defer distribution until the later of the Normal Retirement Age or the Participant’s Required Beginning Date (in accordance with Section 7.07).

(b)    Distribution of a Participant’s Accounts payable on account of Participant’s Total and Permanent Disability will be made or commenced as soon as administratively feasible.

(c)    Distribution of a Participant’s Accounts payable on account of the death will be made or commenced as soon as administratively feasible following the death of the Participant. In the event of the Participant’s death, the Committee or its delegate shall permit the Beneficiary to select the method of distributing the Participant’s benefits if the Participant does not file a written direction with the Committee or its delegate prior to his or her death.

(d)    Notwithstanding anything in the above to the contrary and absent a Participant election to the contrary, payment of benefits shall commence no later than sixty (60) days following the latest of the close of the Plan Year in which:

(i)    The Participant reaches Normal Retirement Age; or

(ii)    The Participant incurs a Severance of Employment.

7.06    Forms of Payment.

(a)    Lump Sum Distribution. Subject to Subsections (b) and (c) below, distributions from the Plan will be limited to cash payments in the form of a lump sum of the Participant’s entire vested balance in his or her Accounts.



(b)    In-Kind Distribution – Company Stock. Notwithstanding Subsection (a) above, any amounts representing Company Stock shall, at the option of the Participant, be distributable to the extent available in full shares of Company Stock. If a cash dividend on Company Stock is declared on or before a distribution of such Company Stock but before the cash dividend is received by the Trustee, the Participant’s share of such cash dividend will be distributed to the Participant (without regard to his or her election) upon the next regularly scheduled processing of distributions in accordance with Section 7.10. If a stock dividend, split or other recapitalization of Company Stock (hereinafter referred to as a ‘stock dividend’) is payable to shareholders of record on or before a distribution of such stock, but before the stock dividend is received by the Trustee, the Participant’s share of such stock dividend will be distributed to the Participant as soon as reasonably practicable after it is received by the Trustee.

(c)    Installment Payments. A Participant who has incurred a Severance of Employment and has reached at least age 55 (whether such age is reached before or after the Severance of Employment) may (in lieu of the form of distribution provided in Subsections (a) and (b) above) elect distribution in the form of a systematic withdrawal plan (sometimes referred to as installment payments). The Participant shall elect the number of payments to be made in the systematic withdrawal plan, and may thereafter elect to accelerate or decelerate payments, stop payments or receive a lump sum of the Participant’s remaining Account, provided that such payments must at all times satisfy the requirements of Section 7.07 and Code Section 401(a)(9). A Beneficiary of a deceased Participant who was entitled to elect a systematic withdrawal plan or an Alternate Payee with respect to a Participant who is entitled to elect a systematic withdrawal plan may elect a systematic withdrawal plan to the same extent as available to the Participant, provided that the requirements of Section 7.07 and Code Section 401(a)(9) are satisfies for such Beneficiary or Alternate Payee.

7.07    Required Minimum Distributions. The requirements of this Section 7.07 will take precedence over any inconsistent provisions of the Plan. All distributions required under this Section 7.07 will be determined and made in accordance with the Treasury Regulations under Code Section 401(a)(9).

(a)    Time and Manner of Distribution.

(i)    Required Beginning Date. The Participant’s entire interest will be distributed, or begin to be distributed, to the Participant no later than the Participant’s Required Beginning Date.

(ii)    Death of Participant Before Distributions Begin. If the Participant dies before distributions begin, the Participant’s entire interest will be distributed, or begin to be distributed no later than as follows:

(A)    If the Participant’s surviving Spouse is the Participant’s sole designated Beneficiary, then, except as otherwise provided, distributions to the surviving Spouse will begin by December 31 of the calendar year immediately


following the calendar year in which the Participant died, or by December 31 of the calendar year in which the Participant would have attained: (i) age 73 on or after January 1, 2023; (ii) age 72 before January 1, 2023; or (iii) age 70½ prior to January 1, 2020, if later.

(B)    If the Participant’s surviving Spouse is not the Participant’s sole designated Beneficiary, then, except as otherwise provided, distributions to the designated Beneficiary will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died.

(C)    If there is no designated Beneficiary as of September 30 of the year following the year of the Participant’s death, the Participant’s entire interest will be distributed by December 31 of the calendar year containing the fifth (5th) anniversary of the Participant’s death.

(D)    If the Participant’s surviving Spouse is the Participant’s sole designated Beneficiary and the surviving Spouse dies after the Participant but before distributions to the surviving Spouse begin, this Section 7.07(a)(ii), other than Section 7.07(a)(ii)(A), will apply as if the surviving Spouse were the Participant.

For purposes of this Section 7.07(a)(ii) and Section 7.07(d), unless Section 7.07(a)(ii)(D) applies, distributions are considered to begin on the Participant’s required beginning date. If Section 7.01(a)(ii)(D) applies, distributions are considered to begin on the date distributions are required to begin to the surviving Spouse under this provision. If distributions under an annuity purchased from an insurance company irrevocably commence to the Participant before the Participant’s required beginning date (or to the Participant’s surviving Spouse before the date distributions are required to begin to the surviving Spouse under this provision), the date distributions are considered to begin is the date distributions actually commence.

(iii)    Forms of Distribution. Unless the Participant’s interest is distributed in the form of an annuity purchased from an insurance company or in a single sum on or before the required beginning date, as of the first distribution calendar year distributions will be made in accordance with Section 7.07(b) and (c). If the Participant’s interest is distributed in the form of an annuity purchased from an insurance company, distributions thereunder will be made in accordance with the requirements of Code Section 401(a)(9) and the Treasury Regulations.

(b)    Required Minimum Distributions During Participant’s Lifetime.

(i)    Amount of Required Minimum Distribution for Each Distribution Calendar Year. During the Participant’s lifetime, the minimum


amount that will be distributed for each distribution calendar year is the lesser of:

(A)    The quotient obtained by dividing the Participant’s Account Balance by the distribution period in the Uniform Lifetime Table set forth in Section 1.401(a)(9)-9 of the Treasury Regulations, using the Participant’s age as of the Participant’s birthday in the distribution calendar year; or

(B)    If the Participant’s sole designated Beneficiary for the distribution calendar year is the Participant’s Spouse, the quotient obtained by dividing the Participant’s Account Balance by the number in the Joint and Last Survivor Table set forth in Section 1.401(a)(9)-9 of the Treasury Regulations, using the Participant’s and Spouse’s attained ages as of the Participant’s and Spouse’s birthday in the distribution calendar year.

(ii)    Lifetime Required Minimum Distributions Continue Through the Year of Participant’s Death. Required minimum distributions will be determined under this Section 7.07(b) beginning with the first distribution calendar year and up to and including the distribution calendar year that includes the Participant’s date of death.

(c)    Required Minimum Distributions After Participant’s Death.

(i)    Notwithstanding the foregoing, if a Participant dies, the following provisions shall apply:

(A)    If the Participant’s Beneficiary is a Designated Beneficiary but not an Eligible Designated Beneficiary, the Participant’s Account Balance shall be distributed pursuant to the 10-Year Method.

(B)    If the Participant’s Beneficiary is not a Designated Beneficiary or an Eligible Designated Beneficiary and the Participant died before his or her Required Beginning Date, the Participant’s Account Balance shall be distributed pursuant to the 5-Year Method; provided, however, that if the Participant died on or after his or her Required Beginning date, then the beneficiary must receive annual payments based on the Participant’s remaining Life Expectancy.

(C)    If the Participant’s Eligible Designated Beneficiary is the Participant’s surviving Spouse, the surviving Spouse may elect to have the Participant’s Account Balance distributed pursuant to the Life Expectancy Method or the 10-Year Method; provided, however, that if the surviving Spouse fails to timely make an election, the Participant’s Account Balance may be paid under the Life Expectancy Method in accordance with administrative procedures.



(D)    If the Participant’s Eligible Designated Beneficiary is not the Participant’s surviving Spouse, the Eligible Designated Beneficiary may elect to have the Participant’s Account Balance distributed pursuant to the Life Expectancy Method or the 10-Year Method; provided, however, that if the Eligible Designated Beneficiary fails to timely make an election, the Participant’s Account Balance may be paid under the 10-Year Method in accordance with administrative procedures. Notwithstanding the foregoing, in the case of an Eligible Designated Beneficiary who is a minor child of the Participant, the Account Balance shall be distributed no later than the end of the tenth year after the Beneficiary reaches the age of majority.

(E)    If the Participant’s Eligible Designated Beneficiary qualifies as a ‘look-through’ trust (as determined in accordance with administrative procedures) and the sole beneficiary of the trust is an Eligible Designated Beneficiary, the Eligible Designated Beneficiary may elect to have the Participant’s Account Balance distributed pursuant to the Life Expectancy Method or the 10-Year Method; provided, however, that if the Eligible Designated Beneficiary fails to timely make an election, the Participant’s Account Balance may be paid in the 10-Year Method (for a non-surviving Spouse) or the Life Expectancy Method (for a surviving Spouse) in accordance with administrative procedures. Notwithstanding anything herein to the contrary, if there are multiple beneficiaries of the trust, the Life Expectancy Method shall not apply and the Participant’s Account Balance shall be paid pursuant to the 10-Year Method or the 5-Year Method as determined in accordance with administrative procedures based on the beneficiaries of the trust.

If a Participant has more than one Beneficiary as of his or her death, the Participant’s Account Balance shall be segregated into a separate Account for each Beneficiary and paid in accordance with such Beneficiary’s election and/or the default payments outlined above, in accordance with administrative procedures.

(d)    Definitions. For purposes of this Section 7.07 only, the following definitions shall apply:

(i)    Designated Beneficiary. The individual who is designated as the Beneficiary under Section 2.07 of the Plan and is the designated Beneficiary under Code Section 401(a)(9) and Section 1.401(a)(9)-1, Q&A-4, of the Treasury Regulations.

(ii)    Distribution Calendar Year. A calendar year for which a minimum distribution is required. For distributions beginning before the Participant's death, the first distribution calendar year is the


calendar year immediately preceding the calendar year which contains the Participant's required beginning date. For distributions beginning after the Participant's death, the first distribution calendar year is the calendar year in which distributions are required to begin under Section 7.07 of the Plan. The required minimum distribution for the Participant's first distribution calendar year will be made on or before the Participant's required beginning date. The required minimum distribution for other distribution calendar years, including the required minimum distribution for the distribution calendar year in which the Participant's required beginning date occurs, will be made on or before December 31 of that distribution calendar year.

(iii)    Life Expectancy. Life expectancy as computed by use of the Single Life Table in Section 1.401(a)(9) of the Treasury Regulations.

(iv)    Participant's Account Balance. The account balance as of the last Valuation Date in the calendar year immediately preceding the distribution calendar year (valuation calendar year) increased by the amount of any contributions made and allocated or forfeitures allocated to the account balance as of dates in the valuation calendar year after the Valuation Date and decreased by distributions made in the valuation calendar year after the Valuation Date. The account balance for the valuation calendar year includes any amounts rolled over or transferred to the Plan either in the valuation calendar year or in the distribution calendar year if distributed or transferred in the valuation calendar year.

(v)    Required Beginning Date. A Participant’s Required Beginning Date is April 1 of the calendar year following the later of the calendar year in which the Participant attains (i) age 73 on or after January 1, 2023; (ii) age 72 before January 1, 2023; (iii) age 70½ prior to January 1, 2020; or (iv) at the Participant’s option, the calendar year in which the Participant retires from employment with the Employer except as otherwise provided in Code Section 401(a)(9)(c)(ii).

(vi)    Eligible Designated Beneficiary. A Participant’s Designated Beneficiary who, as of the date of the Participant’s death, is (i) the Participant’s surviving Spouse; (ii) the Participant’s child who has not reached the age of majority (as defined for purposes of Code Section 401(a)(9)(F)); (iii) a disabled individual (within the meaning of Code Section 72(m)(7)); (iv) an individual who has been certified to be chronically ill (as defined in Code Section 7702B(c)(2)) for a reasonably lengthy period, or indefinitely); or (v) an individual who is not more than ten years younger than the Participant. The determination of who is an Eligible Designated Beneficiary shall be made pursuant to administrative procedures and in accordance with Code Section 401(a)(9)(E), as amended by the Setting Every Community Up for Retirement Enhancement Act (‘SECURE Act’), and any regulations or guidance issued thereunder by the Internal Revenue Service.



(vii)    10-Year Method. The Participant’s Account Balance is paid to the beneficiary no later than December 31 of the tenth (10th) year following the year of the Participant’s death, pursuant to with administrative procedures and in accordance with Code Section 401(a)(9), including Code Section 401(a)(9)(H), as amended by the SECURE Act, and any Treasury Regulations or IRS guidance issued thereunder.

(viii)    5-Year Method. The Participant’s Account Balance is paid to the beneficiary no later than December 31 of the fifth (5th) year following the year of the Participant’s death.

(ix)    Life Expectancy Method. The Participant’s Account Balance is paid to the beneficiary in installment payments, with the minimum required annual amount based on the beneficiary’s remaining Life Expectancy, in accordance with administrative procedures.

(e)    Special Rule for Surviving Spouses During or After 2024. Notwithstanding the foregoing, if the Participant’s surviving Spouse is the sole Designated Beneficiary and the first year for which annual required minimum distributions to the surviving Spouse must be made is 2024 or later, the amount distributed to such surviving Spouse for each calendar year after the year of the Participant’s death shall be no less than the quotient obtained by dividing the Participant’s Account Balance by the denominator determined using the Uniform Lifetime Table in Treas. Reg. 1.401(a)(9)-(c) for the surviving Spouse’s age as of the surviving Spouse’s birthday in the distribution calendar year, provided that if the surviving Spouse dies after the Required Beginning Date, (i) the denominator for purposes of determining distributions to the surviving Spouse’s beneficiary shall be determined as follows: (A) the beneficiary’s life expectancy for each calendar year that starts before the surviving Spouse’s death is determined using the surviving Spouse’s age as of the surviving Spouse’s birthday in the applicable year, and (B) the beneficiary’s life expectancy for calendar years starting after the surviving Spouse’s death is determined using the surviving Spouse’s age as of the surviving Spouse’s birthday in the calendar year of the surviving Spouse’s death from the Single Life Table in Treas. Reg. 1.401(a)(9)-(c), reduced by one for each calendar year that has elapsed after the calendar year of the surviving Spouse’s death; and (ii) a final distribution of the Participant’s entire interest must be made by the end of the calendar year that includes the tenth anniversary of the surviving Spouse’s death.

7.08    Involuntary Cash-Out of Vested Regular Account. If the value of a Participant’s nonforfeitable balance in his or her Accounts is $1,000 or less and such Participant does not elect to have such a distribution paid directly to an Eligible Retirement Plan (as defined in Section 7.10(g)) specified by the Participant in a Direct Rollover (as defined in Plan Section 7.10(g)), in accordance with the Direct Rollover provisions of the Plan, or to receive the distribution directly, then the Committee or its delegate shall pay the distribution directly to the Participant in the form of a lump sum payment.



If the value of a Participant’s nonforfeitable balance in his or her Accounts exceeds $1,000 but is $7,000 or less and such Participant does not elect to have such a distribution paid directly to an Eligible Retirement Plan (as defined in Section 7.10(g)) specified by the Participant in a Direct Rollover (as defined in Plan Section 7.10(g)), in accordance with the Direct Rollover provisions of the Plan, or to receive the distribution directly, then the Committee or its delegate shall pay the distribution in a Direct Rollover to an individual retirement plan designated by the Committee or its delegate. Upon distribution to the individual retirement plan, the Committee or its delegate may engage with administrators and recordkeepers to locate and rollover all assets held in the individual retirement plan to any other Eligible Retirement Plan in which the former Participant of this Plan participates.

For purposes of this Section 7.08, the value of a Participant’s nonforfeitable balance in his or her Accounts shall be determined without regard to the balance in his or her Tax-Deferred Rollover Contributions Account and Roth Rollover Contributions Account.

For purposes of this Section 7.08, spousal consent, as provided under Section 7.01, is not required.

7.09    Voluntary Cash-Out of Vested Regular Account. A Participant entitled to a distribution of benefits may elect to receive a lump sum distribution of his or her entire vested interest in his or her Accounts.

7.10    Direct Rollover. All non-periodic distributions and periodic payments shall be subject to all withholdings and taxes as required by law, unless pursuant to Code Section 401(a)(31) and Treasury Regulation Section 1.401(a)(31)-1, the Distributee of any Eligible Rollover Distribution elects to have the distribution paid directly to an Eligible Retirement Plan in a Direct Rollover. Accordingly, in addition to any other required payment restrictions, the Committee or its delegate shall, not less than thirty (30) days or more than one-hundred-eighty (180) days prior to a distribution, provide the Distributee with a notice of his or her right to have his or her distribution paid in a Direct Rollover to an Eligible Retirement Plan and provide the Distributee the means to make such election in accordance with the following:

(a)    If a distribution is one to which Code Sections 401(a)(11) and 417 do not apply, such distribution may commence less than thirty (30) days after the notice required under Section 1.411(a)-11(c) of the Income Tax Regulations is given, provided that:

(i)    The Committee or its delegate clearly informs the Participant that the Participant has a right to a period of at least thirty (30) days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and

(ii)    The Participant, after receiving the notice, affirmatively elects a distribution.

(b)    Reserved.

(c)    Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee’s election under this Section 7.10, a Distributee may elect, at the time and in the manner prescribed by the Committee or its delegate to have any portion of an Eligible Rollover


Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover.

(d)    Non-Spousal Rollover. A Beneficiary, other than the Participant's Spouse, who is a “Designated Beneficiary” as described in Code Section 401(a)(9)(E) may establish an IRA into which all or a portion of a death benefit to which such Beneficiary is entitled can be distributed pursuant to a direct trustee-to-trustee transfer. Notwithstanding the above, any amount payable to a non-Spouse Designated Beneficiary that is deemed to be a required minimum distribution (as described in Plan Section 7.07) may not be transferred into such IRA. If a Participant dies before his or her required beginning date, the non-Spouse Designated Beneficiary may deposit into such IRA all or any portion of the distribution that is deemed to be an Eligible Rollover Distribution. In determining the portion of such distribution that is considered to be a required minimum distribution, the Beneficiary may elect to use either the 5-year rule or the life expectancy rule, pursuant to Treasury Regulation Section 1.401(a)(9)-3, Q&A-4(c). Any distribution made pursuant to this Section 7.10 is not subject to the Direct Rollover requirements of Code Section 401(a)(31), the notice requirements of Code Section 402(f) or the mandatory withholding requirements of Code Section 3405(c). If a non-Spouse Designated Beneficiary receives a distribution from the Plan, such distribution is not eligible for the “60-day” rollover rule otherwise available to a spousal Beneficiary. If the Participant's named Beneficiary is a trust, the Plan may make a Direct Rollover to an IRA on behalf of the trust, provided the trust satisfies the requirements to be a Designated Beneficiary described in Code Section 401(a)(9)(E).

(e)    Direct Rollover of Roth Accounts. Notwithstanding any other provision of this Section 7.10, a Direct Rollover of a distribution from a Participant’s Roth Contributions Account or Roth Rollover Contributions Account (shall only be made to another Roth elective deferral account under an applicable retirement plan described in Code Section 402A(e)(1) or to a Roth IRA described in Code Section 408A, and only to the extent the rollover is permitted under the rules of Code Section 402(e). Eligible Rollover Distributions from a Participant’s Roth Contributions Account or Roth Rollover Contributions Account are taken into account in determining whether the total amount of the Participant’s account balances under the Plan exceeds $7,000 for purposes of involuntary cash-outs, as provided under Section 7.08.

(f)    Direct Rollover of Voluntary Contributions Accounts. Notwithstanding any other provision of this Section 7.10, a Distributee may elect, at the time and in the manner prescribed by the Committee or its delegate, to have the portion of an Eligible Rollover Distribution that is attributable to his or her Voluntary Contributions Account paid directly to a Roth IRA described in Code Section 408A in a Direct Rollover, to the extent the Direct Rollover is permitted under the rules of Code Section 402 and guidance issued thereunder, including IRS Notice 2014-54.

(g)    Definitions.



(i)    An “Eligible Rollover Distribution” is a distribution of any amount to the Distributee from an Eligible Retirement Plan, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or joint life expectancies) of the Distributee and the Distributee’s designated Beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Code Section 401(a)(9); the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities); hardship withdrawals; a Qualified Birth or Adoption Distribution, an Emergency Personal Expense Distribution, a Qualified Disaster Recovery Distribution, a Domestic Abuse Victim Distribution, or a Terminal Illness Distribution; and any other type of distribution which the Internal Revenue Service announces (pursuant to regulation, notice or otherwise) is not an Eligible Rollover Distribution. For purposes of the Direct Rollover provisions in this Section, a portion of a distribution shall not fail to be an Eligible Rollover Distribution merely because it consists of after-tax employee contributions which are not includible in gross income. After-tax employee contributions may be transferred to a qualified plan described in Code Section 401(a) or a Code Section 403(b) annuity, so long as the rollover is made pursuant to a direct trustee-to-trustee transfer and the recipient plan or 403(b) arrangement provides for separate accounting of both the amounts transferred and the earnings on those amounts.

(ii)    An “Eligible Retirement Plan” is:

(A)    A plan qualified under Code Section 401(a);

(B)    An individual retirement account subject to Code Section 408(d)(3);

(C)    An annuity contract described in Code Section 403(b);

(D)    An eligible deferred compensation plan described in Code Section 457(b) which is maintained by an eligible employer described in Code Section 457(e)(1)(A);

(E)    A Roth deferral account under an applicable retirement plan described in Code Section 402A(e)(1) but only to the extent the rollover is permitted under the rules of Code Section 402(c);

(F)    A Roth IRA established under Code Section 408A; or

(G)    An inherited IRA a non-Spouse Beneficiary establishes for purposes of receiving a distribution.



(iii)    A “Distributee” includes an Employee or former Employee. In addition, the Employee’s or former Employee’s surviving Spouse and the Employee’s or former Employee’s Spouse or former Spouse who is the alternate payee under a qualified domestic relations order, as defined in Code Section 414(p), are Distributees with regard to the interest of the Spouse or former Spouse.

(iv)    A “Direct Rollover” is a payment by the Plan to an Eligible Retirement Plan specified by the Distributee.

7.11    Qualified Military Service. Notwithstanding any provision of this Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with Code Section 414(u).

(a)    Death Benefits. If a Participant dies while performing qualified military service (as defined in Code 414(u)), the survivors of the Participant are entitled to any additional benefits (other than benefit accruals relating to the period of qualified military service) provided under the Plan as if the Participant had resumed and then terminated employment on account of death.

(b)    Differential Wage Payments. (i) An individual receiving a differential wage payment, as defined by Code Section 3401(h)(2), is treated as an Employee of the employer making the payment, (ii) the differential wage payment is treated as compensation, and (iii) the Plan is not treated as failing to meet the requirements of any provision described in Code Section 414(u)(1)(C) by reason of any contribution or benefit which is based on the differential wage payment.

(c)    Severance From Employment. Notwithstanding Section 7.12(b)(i) of the Plan, for purposes of Code Section 401(k)(2)(B)(i)(I), an individual is treated as having been severed from employment during any period the individual is performing service in the uniformed services described in Code Section 3401(h)(2)(A).

(i)    Suspension of Deferrals. If an individual elects to receive a distribution by reason of severance from employment, death or disability, the individual may not make Tax-Deferred Contributions or Roth Contributions during the 6-month period beginning on the date of the distribution.

(ii)    Nondiscrimination requirement. Section 7.12(b)(iii) of the Plan applies only if all Employees of the Employer performing service in the uniformed services described in Code Section 3401(h)(2)(A) are entitled to receive differential wage payments (as defined in Code Section 3401(h)(2)) on reasonably equivalent terms and, if eligible to participate in a retirement plan maintained by the Employer, to make contributions based on the payments on reasonably equivalent terms (taking into account Code Section 410(b)(3), (4), and (5)).



7.12    Qualified Domestic Relations Orders. Subject to the procedures established by the Committee or its delegate under Section 8.01, benefits may be paid from the nonforfeitable balance of a Participant’s Accounts in accordance with a qualified domestic relations order as defined in Code Section 414(p) without regards to whether the Participant has attained the “earliest retirement age,” as defined in Code Section 414(p).

A domestic relations order that otherwise satisfies the requirements for a qualified domestic relations order will not fail to be a qualified domestic relations order: (i) solely because the order is issued after, or revises, another domestic relations order or qualified domestic relations order; or (ii) solely because of the time at which the order is issued.

7.13    Persons under Legal or Other Disability. In the event a Participant or his or her Beneficiary is judicially determined to be incompetent, and a conservator or other person legally charged with the care of his or her person or of his or her estate is appointed, any benefits to which such Participant or Beneficiary is entitled shall be paid to such conservator or other person legally charged with the care of his or her person or of his or her estate. Except as provided in this Section, when, in the opinion of the Committee or its delegate, a Participant or his or her Beneficiary is in any way incapacitated so as to be unable to manage his or her financial affairs, the Committee or its delegate may direct the Funding Agent to make payments or distributions to his or her legal representative or to a relative or friend of such person for his or her benefit, or the Committee or its delegate may direct the Funding Agent to make payments and distributions for the benefit of the Participant or his or her Beneficiary in any way the Committee or its delegate determines as further detailed in Section 2.07.

7.14    Missing Participants or Beneficiaries. Each Participant and each Beneficiary shall file, or cause to be filed, with the Committee or its delegate through the Employer from time to time in writing, his or her mailing address and each change of mailing address. Any communication, statement or notice addressed to a Participant or his or her Beneficiary at his or her last mailing address filed with the Committee or its delegate, or if no address is filed with the Committee or its delegate, then at his or her last mailing address as shown on the Employer’s records, will be binding on the Participant and his or her Beneficiary for all purposes of the Plan.

If the Committee cannot ascertain the whereabouts of any person to whom a payment is due under the Plan, the Committee shall make such efforts to locate such person as are considered a reasonable fulfillment of the Committee’s fiduciary obligations, such as using methods that may be issued or recommended by the Department of Labor and/or the Internal Revenue Service, as applicable. If, after such search efforts have been made, the Employer is unable to locate the person to whom a payment is due under the Plan, the Employer may, at its discretion, direct that such payment otherwise due to such person be treated as a Forfeiture under Section 6.02. Upon such forfeiture, the Plan shall have no further liability therefor except that, in the event such person later notifies the Employer of his or her whereabouts and requests the payment due to such person under the Plan, that amount shall be paid to such person as provided in this Article VII.

The benefit payable to a Participant or Beneficiary who fails to cash a benefit check within a reasonable period of time after the benefit check is issued, may be treated as a Forfeiture under Section 6.02. Upon such forfeiture, the Plan shall have no further liability therefor except that, in the event such person later notifies the Employer of his or her whereabouts and requests the payment due to such person under the Plan, that amount shall be paid to such person as provided in this Article VII.



7.15    Qualified Birth or Adoption Distributions. Effective as of April 28, 2025, a Participant may withdraw an amount from his or her vested Account balance that is a Qualified Birth or Adoption Distribution, subject to the following rules:

(a)    A ‘Qualified Birth or Adoption Distribution’ means a distribution from the Plan to a Participant made during the one-year period beginning on the date on which a child of the Participant is born or which the legal adoption by the Participant of an eligible adoptee is finalized. An ‘eligible adoptee’ means any individual (other than a child of the Participant’s Spouse) who has not attained age 18 or is physically or mentally incapable of self-support (determined in the same manner as the determination of whether an individual is disabled under Code Section 72(m)(7)).

(b)    The aggregate maximum amount of a Qualified Birth or Adoption Distribution which a Participant may withdraw from the Plan and any other plan maintained by the Employer or an Affiliated Employer shall not exceed $5,000 (or if less, the Participant’s vested Account balance) for each child born to, or eligible adoptee legally adopted by, the Participant (the ‘Maximum QBOAD’). If the Participant and his or her Spouse each have an Account under the Plan, both the Participant and the Spouse can each withdraw the Maximum QBOAD for each child born to, or eligible adoptee legally adopted by, the Participant and his or her Spouse.

(c)    The withdrawal or contribution of a Qualified Birth or Adoption Distribution shall be made in accordance with any reasonable procedures adopted by the Committee. To the extent permitted under applicable law, the Committee may rely on reasonable representations from the Participant that he or she is eligible to withdraw a Qualified Birth or Adoption Distribution, unless the Employer or the Committee has actual knowledge to the contrary.

7.16    Emergency Personal Expense Distribution. Effective February 4, 2025, a Participant may request an Emergency Personal Expense Distribution from the Participant’s Account once per calendar year provided, however, that the maximum amount of any Emergency Personal Expense Distribution in a calendar year (when aggregated with similar distributions under the Plan and any other plan maintained by the Employer) will not exceed the lesser of one-thousand dollars ($1,000) or the Participant’s nonforfeitable Account balance less one-thousand dollars ($1,000). A Participant who receives an Emergency Personal Expense Distribution may not receive another Emergency Personal Expense Distribution in the following three (3) calendar years unless the previous distribution is repaid in accordance with Section 7.21 or the aggregate amount of Tax-Deferred Contributions to the Plan after the date of the Emergency Personal Expense Distribution is at least equal to the amount of such distribution. “Emergency Personal Expense Distribution” means a distribution to a Participant during a calendar year to meet an unforeseeable or immediate financial need related to necessary personal or family emergency expenses. To the extent permitted by law, the Employer may rely on a Participant’s reasonable written representation that the Participant satisfies the requirements to receive an Emergency Personal Expense Distribution, unless the Employer has actual knowledge to the contrary.

7.17    Qualified Disaster Recovery Distribution. Effective April 28, 2025, a Participant may request a Qualified Disaster Recovery Distribution from the Participant’s Account, provided, however, that the maximum amount of any Qualified Disaster Recovery Distribution (when aggregated with similar distributions under the Plan and any other plan


maintained by the Employer) with respect to each qualified disaster will not exceed twenty-two thousand dollars ($22,000). ‘Qualified Disaster Recovery Distribution’ means a distribution to a Participant on or after the incident period of a qualified disaster and before the date that is 180 days after the applicable date with respect to such disaster who has a principal place of abode during the incident period in the qualified disaster area and who has sustained an economic loss by reason of such qualified disaster. For this purpose, ‘qualified disaster’ means a major disaster declared by the President of the United States under Section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act after December 27, 2020, ‘qualified disaster area’ means the area with respect to which the major disaster was declared, ‘incident period’ means the period during which the disaster occurred as specified by the Federal Emergency Management Agency, and ‘applicable date’ means the latest of the first day of the incident period with respect to the qualified disaster or the date of the disaster declaration. A Participant requesting a Qualified Disaster Recovery Distribution must submit evidence to the Employer that supports the Participant’s application for such distribution.

7.18    Domestic Abuse Victim Distributions. Effective April 28, 2025, a Participant may request a Domestic Abuse Victim Distribution from the Participant’s Account (excluding any part of an Account attributable to a plan that requires payment of a qualified joint and survivor annuity), provided, however, that the maximum amount of any Domestic Abuse Victim Distribution (when aggregated with similar distributions under the Plan and any other plan maintained by the Employer) will not exceed the lesser of the limit in effect for the Plan Year under Code Section 72(t)(2)(K)(ii)(I) or fifty percent (50%) of the Participant’s Account. ‘Domestic Abuse Victim Distribution’ means a distribution to a Participant during the one-year period beginning on the date on which the Participant is the victim of domestic abuse by a Spouse or domestic partner. For this purpose, ‘domestic abuse’ has the meaning defined in Code Section 72(t)(2)(K)(iii)(II). To the extent permitted by law, the Employer may rely on a Participant’s reasonable representation that the Participant satisfies the requirements to receive a Domestic Abuse Victim Distribution, unless the Employer has actual knowledge to the contrary.

7.19    Terminal Illness Distributions. Effective April 28, 2025, a Participant who is an Employee may withdraw an amount from the vested portion of the Participant’s Account that meets the requirements to be a Terminal Illness Distribution, subject to the following:

(a)    A ‘Terminal Illness Distribution’ is a distribution from the Plan to a Participant who is otherwise entitled to take a distribution from the Plan that is made on or after the date that the Participant provides the Plan with certification from a physician that the Participant has an illness or physical condition which can reasonably be expected to result in death in eighty-four (84) months or less after the date of the certification.

(b)    A Termination Illness Distribution will not be subject to a penalty under Code Section 72(t), even if the Participant has not attained age fifty-nine and a half (59½).

(c)    The withdrawal or contribution of a Terminal Illness Distribution shall be made in accordance with any reasonable procedures adopted by the Employer, its delegates, the terms of the SECURE 2.0 Act and the regulations and other guidance issued thereunder.

7.20    Return of Certain Distributions as Rollover. A Participant who is eligible to make Tax-Deferred Rollover Contributions to the Plan under Section 3.06 and who has received a Qualified Birth or Adoption Distribution, Emergency Personal Expense Distribution, Qualified


Disaster Recovery Distribution, Domestic Abuse Victim Distributions, or Terminal Illness Distribution from the Plan or any other applicable eligible retirement plan may, at any time within three years of the date of the distribution, make one (1) or more contributions to the Plan in an aggregate amount not to exceed the amount of the distribution. Such contributions shall be treated as Tax-Deferred Rollover Contributions and shall be deemed to have been transferred to the Plan within sixty (60) days of the date the Qualified Birth or Adoption Distribution, Emergency Personal Expense Distribution, Qualified Disaster Recovery Distribution, Domestic Abuse Victim Distribution, or Termination Illness Distribution was received by the Participant. The amount so contributed shall be credited to the Participant’s Account and shall be held, accounted for, and administered and otherwise treated in the same manner as contributions under the Plan.

7.21    Former ESOP Account Put Option. If at the time of distribution, shares of Company stock distributed from the an Employee’s Former ESOP Account is not readily tradable on an established market within the meaning of Code and Regulation Section 409(h), such Stock shall be subject to a put option in the hands of a Qualified Holder by which such Qualified Holder may sell all or any part of the Company stock distributed to him to the Trustee. Should the Trustee decline to purchase all or any part of the Company stock put to it by the Qualified Holder, the Company shall purchase the Company stock that the Trustee declines to purchase. The protections and rights described in this Section are non-terminable. The put option shall be subject to the following conditions:

(a)    The term “Qualified Holder” shall mean the Employee or Beneficiary receiving the distribution of such Company stock, any other party to whom the Stock is transferred by gift or by reason of death, and also any trustee of an individual retirement account (as defined under Code Section 408) to which all or any portion of the distributed Company stock is transferred pursuant to a tax-free “rollover” transaction satisfying the requirements of Code Sections 402 and 408.

(b)    During the sixty (60)-day period following any distribution of such Company stock, a Qualified Holder shall have the right to require the Company to purchase all or a portion of the distributed Company stock held by the Qualified Holder. The purchase price to be paid for any such Company stock shall be their fair market value determined (1) as of the Valuation Date coinciding with or next preceding the exercise of the put option under this Section or, (2) in the case of a transaction between the Plan and a “disqualified person” within the meaning of Code Section 4975(e)(2) or a “party in interest” within the meaning of ERISA Section 3(14), as of the date of the transaction.

(c)    If a Qualified Holder shall fail to exercise his put option right under this Section, the option right shall temporarily lapse upon the expiration of the sixty (60)-day period. As soon as practicable following the last day of the Plan Year in which the sixty (60)-day option period expires, the Company shall notify the non-electing Qualified Holder (if he is then a shareholder of record) of the valuation of the Company stock as of that date. During the sixty (60)-day period following receipt of such valuation notice, the Qualified Holder shall again have the right to require the Company to purchase all or any portion of the distributed Company stock. The purchase price to be paid therefor shall be fair market value determined (1) as of the Valuation Date coinciding with or next preceding the exercise of


the put option under this Section or, (2) in the case of a transaction between the Plan and a “disqualified person” within the meaning of Code Section 4975(e)(2) or a “party in interest” within the meaning of ERISA Section 3(14), as of the date of the transaction.

(d)    The foregoing put options shall be effective solely against the Company and shall not obligate the Plan or Trust in any manner.

(e)    In making the determination of fair market value, the Company shall consider, to the extent permitted by law, the same methodology used to value the Company stock at the time of its initial purchase by the ESOP Trustee and shall, to the extent permitted by law, include as a valuation factor at least the same proportionate share of enterprise value as was taken into account at the time of such purchase of Company stock.

(f)    The period during which the put option is exercisable does not include any time when a Qualified Holder is unable to exercise it because the Company is prohibited from honoring it by applicable Federal or State laws.

(g)    Except as otherwise required or permitted by the Code, the put options under this Section shall satisfy the requirements of Treasury Regulation Sections 54.4975-7(b) and 54.4975-11(a)(7)(i) to the extent, if any, that such requirements apply to such put options.

(h)    A Qualified Holder must exercise his put option in writing. If a Qualified Holder exercises his put option under this Section, payment for the Company stock repurchased shall be made, in the case of a distribution of a Participant’s Account within one (1) taxable year, in substantially equal annual payments over a period beginning not later than thirty (30) days after the exercise of the put option and not exceeding five (5) years (provided that adequate security and reasonable interest are provided with respect to unpaid amounts) or, in the case of other distributions, not later than thirty (30) days after such exercise.




















ARTICLE VIII
THE COMMITTEE

8.01    Committee. The Employer is the “named fiduciary” (within the meaning of ERISA Section 402(a)(3)) and “administrator” (within the meaning of ERISA Section 3(16)(A)). The Employer has delegated to the Committee the full power, authority and fiduciary responsibilities under ERISA with respect to the day-to-day operation and administration of, and investment of assets under, consistent with the established investment policies and the requirements of any applicable law. The Committee shall have sole discretionary authority within the limits provided by the Plan to do, or cause to be done by one or more parties appointed by the Committee, the following:

(a)    Establish and enforce certain rules, regulations and procedures as it deems necessary or proper for the efficient administration of the Plan and for the determination of benefit claims and appeals under the Plan;

(b)    To interpret the Plan, in its discretion, with its interpretations made in good faith to be final and conclusive, and to decide all questions concerning the Plan and claims for benefits and appeals under the Plan;

(c)    To prepare, file and/or provide to participants, as applicable, any reports, notifications, summary plan descriptions, summaries of material modifications, and summary annual reports required by the Plan, ERISA and the Code, as amended, as any of them may be amended from time to time;

(d)    To delegate to another person or employee of the Company the authority and responsibility to exercise one or more of the powers reserved to the Committee herein;

(e)    To evaluate administrative procedures; and

(f)    To amend the Plan provided such amendment is not expected to result in a significant increase in the cost to Company or any affiliated company which also participates in the Plan. For this purpose, there is a "significant increase in cost" if the annual cost to Company and any affiliated company which participates in the Plan is increased in the aggregate by $250,000 as determined with the assistance of the Plan’s service providers.

(g)    To decide all questions of Plan eligibility, to determine the amount, manner and time of payment of any benefits under the Plan, to make determinations as to the right of any person to a benefit, to afford any person dissatisfied with such determination the right to a hearing thereon, to direct payments or distributions from the Trust in accordance with the provisions of the Plan, and to take any action it considers necessary to recover benefit payments made to or on behalf of Participants or Beneficiaries in error or on the basis of incorrect or incomplete information (including, without limitation, adjusting amounts of future benefit payments with respect thereto).

(h)    To furnish the Participating Employers with such information as may be required by them for tax or other purposes in connection with the Plan.



(i)    To monitor all fees and expenses associated with the administration of the Plan and to authorize and direct the payment of all Plan expenses from the Plan unless paid by the Employer.

(j)    To maintain all the necessary records for the administration of the Plan other than those maintained by the Funding Agent.

(k)    To establish and maintain subaccounts under the Plan, as it deems appropriate, for the receipt of payments from Plan service providers for the recapture on behalf of the Plan of revenues received by them in excess of the charges of the service providers services. Such amounts shall be used for the payment of reasonable expenses incurred in administering the Plan.

(l)    To appoint or employ agents, attorneys, accountants, actuaries or other persons/organizations (who also may be employed by the Participating Employers, the Trustee, or any investment manager or managers) and to allocate or delegate to them such powers, rights and duties as the Committee considers necessary or advisable to properly carry out the administration of the Plan, provided that any such allocation or delegation and the acceptance thereof must be in writing. All costs, charges, expenses and other out-of-pocket expenses incurred by the Committee under the provisions of this Section shall be paid by the Plan unless charged to the Employer.

(m)    To establish, implement and monitor investment policies and objectives for the Plan’s investment options.

(n)    To take any action appropriate to assure that the Plan assets are invested for the exclusive purpose of providing benefits to Participants and their Beneficiaries in accordance with the Plan and defraying reasonable expenses of administering the Plan, subject to the requirements of any applicable law.

The Committee or its delegate shall have sole discretionary authority to interpret the Plan and determine conclusively all questions arising in the administration, interpretation, and application of the Plan.

8.02    Funding Policy and Method.

(a)    The Committee or its delegate shall establish and carry out a funding policy and method for the Plan which is consistent with the objectives of the Plan and the requirements of Title I of ERISA. In so doing, the Committee shall, from time to time, determine whether the Plan has a short-run need for liquidity (e.g., to pay benefits) or whether liquidity is a long-run goal and investment growth (and the stability of the same) is a more current need or the Committee shall appoint a qualified person to do so.

(b)    The funding policy and method, as established and amended from time to time, shall be communicated by the Committee or its delegate to the


Funding Agent in order that the investment policies of the Fund may be coordinated with the funding policy and method.

8.03    Transmittal of Information. In order to enable the Committee to establish a funding policy and to perform its other functions under the Plan, the Employer shall supply full and timely information to the Committee on all matters relating to the compensation of all Employees and Participants, their employment, their retirement, death, or termination of employment, and such other pertinent facts as may be required. The Committee shall advise the Funding Agent of such of the foregoing facts as may be pertinent to the Funding Agent’s administration of the Fund.

8.04    Indemnification.

(a)    Indemnification Generally. To the fullest extent permitted by applicable law, the Employer agrees to defend and indemnify each and every natural person former, current, or future director, officer, independent contractor, or employee of any Employer to the extent he or she serves as a fiduciary, settlor, or administrator of the Plan (an “Indemnitee”) against any verbal or written threat, demand, suit, cause of action, count, request, action, proceeding, investigation, inquiry, or subpoena, whether civil, criminal, administrative, or investigative in nature, that requests any relief from or action by an Indemnitee, and that relates to the Indemnitee’s status as a fiduciary, settlor, or administrator of the Plan (‘Claim’).

(b)    Defense. The Employer shall pay on behalf of an Indemnitee defense expenses as incurred by the Indemnitee in connection with a Claim (‘Defense Expenses’). If and only to the extent required by applicable law, and only if the Employer secures an appropriate order from a court with competent jurisdiction, the Indemnitee shall execute an undertaking obligating the Indemnitee to repay Defense Expenses paid if, and only to the extent that, a judgment or final adjudication in the Claim establishes that the Indemnitee is not entitled to the Defense Expenses that the Employer has advanced. If, and only to the extent ordered by a court of competent jurisdiction, the Indemnitee is required to provide collateral or reasonable evidence of his or her ability to repay Defense Expenses paid by the Employer in the event that repayment is required, an insurance policy that would indemnify the Indemnitee or advance or pay Defense Expenses shall be reasonable evidence of the Indemnitee’s ability to repay the Employer.

(c)    Presumption for Defense Expenses. To the extent required by applicable law, the Employer shall pay Defense Expenses, subject to any undertaking above, if the Indemnitee provides a written affirmation that the Indemnitee, to the best of his or her knowledge, acted in a manner consistent with his or her obligations under ERISA and applicable law.

(d)    No Relief from Responsibility or Liability. Nothing shall relieve a fiduciary Indemnitee of any responsibility or liability for any duty, obligation, or responsibility under ERISA.

(e)    Insurance. In addition to any other insurance fiduciary liability insurance that is procured by the Employer, the Plan may maintain and procure


fiduciary liability insurance, as consistent with ERISA, that includes as insureds all Indemnitees. All necessary action shall be taken to cause the insurers to pay, on behalf of the insured person, all amounts payable as a result of the Claim in accordance with the terms of the policy.

(f)    Severability. If any portion of this indemnification clause shall be held to be invalid, illegal, or unenforceable for any reason whatsoever: (a) the validity, legality, and enforceability of the remaining provisions (including, but not limited to, each portion of any paragraph containing any provision held to be invalid, illegal, or unenforceable that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the indemnity and defense rights shall be construed to the broadest extent possible. If any portion of this Section 8.04 is deemed unenforceable or invalid for any reason, the parties shall jointly request that the Court revise or permit the parties to revise this Section 8.04 to delete any unenforceable or invalid provisions so as to provide the broadest scope of defense and indemnification to Indemnitee under applicable law.

(g)    State Law. Nothing in this Section 8.04 shall be deemed to override applicable state law if, and only to the extent, applicable state law regulates defense and indemnification of a fiduciary or settlor of the Plan with respect to the defense and indemnification rights in this Section 8.04.

8.05    Determinations and Corrections. It is recognized in the administration of the Plan that certain mathematical and accounting errors may be made, or mistakes arise, by reason of factual errors in information supplied to the Committee. The Committee shall have the power to make such corrections and equitable adjustments, arising from mathematical, accounting or factual errors made in good faith, as the Committee shall in its discretion deem appropriate, which adjustments shall be final and binding on all Employees, former Employees, Participants, former Participants and Beneficiaries.

8.06    Relationship of Fiduciaries. It is the intent of all fiduciaries under the Plan that each fiduciary shall be solely responsible for its own acts or omissions. Except to the extent imposed by ERISA or the Code, no fiduciary shall have the duty to question whether any other fiduciary is fulfilling all of the responsibilities imposed upon such other fiduciary by ERISA or by any regulations or rulings issued thereunder. No fiduciary shall have any liability for breach of fiduciary responsibility of another fiduciary with respect to the Plan unless he or she participates knowingly in such breach, knowingly undertakes to conceal such breach, has actual knowledge of such breach and fails to take reasonable remedial action to remedy said breach or, through his or her negligence in performing his or her own specific fiduciary responsibilities which give rise to his or her status as a fiduciary, has enabled such other fiduciary to commit a breach of the latter’s fiduciary responsibilities.

8.07    Discharge of Duties by Fiduciaries. The Committee and the Funding Agent and any other fiduciary (as that term is defined below) shall discharge their respective duties set forth in this Plan solely in the interest of the Participants and their Beneficiaries:

(a)    For the exclusive purpose of:

(i)    Providing benefits to Participants and their Beneficiaries, and



(ii)    Defraying reasonable expenses of administering the Plan;

(b)    With the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims;

(c)    By diversifying the investments of the Plan so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so; and

(d)    In accordance with this Plan insofar as the Plan is consistent with the provisions of Title I of ERISA.

Such fiduciaries shall not permit the indicia of ownership of any Fund assets to be maintained outside the jurisdiction of the District Courts of the United States, except as may otherwise be allowed under applicable Department of Labor rules and regulations.

For purposes of this Plan, a “fiduciary” is any person who:

(a)    Exercises any discretionary authority or discretionary control respecting management of the Plan or exercises any authority or control respecting management or disposition of its assets;

(b)    Renders investment advice for a fee or other compensation, direct or indirect, with respect to any monies or other property of the Plan, or has any authority or responsibility to do so; or

(c)    Has any discretionary authority or discretionary responsibility in the administration of the Plan.

8.08    Multiple Fiduciary Capacities. Any person or organization may serve in more than one fiduciary capacity with respect to the Plan (including service both as Funding Agent and administrator), provided, however, that the provisions of ERISA Section 406 and Code Section 4975 are not violated.



















ARTICLE IX
AMENDMENT AND TERMINATION

9.01    Amendment. The Company shall have the right to amend or modify the Plan by resolution of the Board of Directors and the right to amend or cancel any amendments. In addition, the Committee shall have the right to amend the Plan, provided such amendment is not expected to result in a significant increase in the cost to Employer or any affiliated company which also participates in the Plan. For this purpose, there is a "significant increase in cost" if the annual cost to Employer and any Affiliated Employer or Non-Affiliated Employer which participates in the Plan is increased in the aggregate by $250,000 as determined with the assistance of the Plan’s service providers.

Such amendments shall be stated in an instrument in writing executed by the Committee, unless otherwise required above, and this Plan shall be deemed to have been amended in the manner and at the time therein set forth, and all Employees, former Employees, Participants, former Participants, Beneficiaries, and the Employer shall be bound thereby; provided, however:

(a)    No such amendment shall be effective which shall attempt to cause any of the assets of the Fund to be used for or diverted to purposes other than for the exclusive benefit of the Participants, former Participants, or their Beneficiaries, except such changes, if any, as may be required to permit this Plan to meet the applicable requirements of ERISA or the Code;

(b)    No such amendment shall have any retroactive effect so as to deprive any Participant of any benefit already vested, except such changes, if any, as may be required to permit this Plan to meet the applicable requirements of ERISA or the Code;

(c)    No such amendment shall create or effect any discrimination in favor of Participants or former Participants who are officers, shareholders or Highly Compensated Employees;

(d)    No such amendment shall increase the duties or liabilities of the Funding Agent without its written consent;

(e)    No such amendment shall cause any reduction in the retirement benefits or other optional form of benefits with respect to benefits accrued to the date of the amendment for any Employee who, at any time on or after the amendment date, satisfied the pre-amendment condition; and

(f)    No such amendment shall eliminate any other benefit, including any optional form of benefit protected pursuant to Code Section 411(d)(6), with respect to benefits accrued as of the date of the amendment.

(g)    No such amendment shall reduce any of the ESOP protected securities features.

9.02    Retroactive Amendments. An amendment under Section 9.01 may be made effective on a date prior to the first day of a Plan Year in which it is adopted only if (a) or (b) below is satisfied:



(a)    Any amendment may be made effective retroactively as of such date as the Employer or Committee considers necessary or appropriate to enable the Plan to meet any applicable requirements of the Code.

(b)    Any amendment which is adopted in order to conform the Plan to any change in federal law, or to any regulation or ruling thereunder, may be made effective as of the date such amendment is required to be effective under such law, regulation or ruling.

9.03    Discontinuance or Termination of Plan. It is the Employer’s expectation that the Plan contained herein and the payment of contributions hereunder will be continued indefinitely, and the Funding Instrument is irrevocable, but continuance of the Plan by the Employer is not assumed as a contractual obligation. The Employer, pursuant to Section 10.01(a), shall be entitled to recover any contributions made to the Fund prior to the time that the Commissioner of Internal Revenue, or his or her delegate, makes an initial determination with respect to the exempt status of the Fund for Federal income tax purposes and the deductibility of contributions by the Employer for its income tax purposes, if the Commissioner of Internal Revenue, or his or her delegate, initially determines that the Plan does not meet the requirements of the Code with the result that the Fund is not exempt from Federal income tax and the contributions of the Employer to the Fund are not deductible in determining its Federal income tax, and furthermore, if such approval is not obtained, the Plan shall be treated as never having been adopted. The Employer reserves the right at any time to reduce or temporarily suspend contributions hereunder. The Employer may discontinue contributions under the Plan at any time by written notice delivered to the Funding Agent without any liability hereunder for any such discontinuance. In the event of a complete discontinuance of contributions by the Employer, the entire interest of each Participant shall be vested to the extent of one hundred percent (100%).

The Employer may terminate the Plan at any time by written notice delivered to the Funding Agent without any liability hereunder for any such termination. The Plan will be deemed terminated:

(a)    If and when the Employer is judicially declared bankrupt; or

(b)    If and when the Employer is a party to a merger in which it is not the surviving business entity or sells all or substantially all of its assets, unless the surviving business entity or purchaser continues the Plan.

Upon termination or partial termination of the Plan, the entire interest of each affected Participant shall be vested to the extent of one hundred percent (100%).

The Funding Agent shall, upon direction of the appropriate Committee, with reasonable promptness, liquidate all assets remaining in the Fund. Upon the liquidation of all assets, the Committee shall make, after deducting estimated expense for liquidation and distribution, the allocations required under Article III.

Following these allocations, Tax-Deferred Contributions, Roth Contributions, Qualified Employer Deferral Contributions and income attributable thereto, shall be distributed to Participants, or their Beneficiaries as soon as administratively feasible after the termination of the Plan, provided that neither the Employer nor an Affiliated Employer maintains a successor Plan. The Funding Agent shall promptly, after receipt of appropriate instructions from the Committee, distribute in accordance with Article VII to each former Participant a benefit equal to the amount credited to such former Participant’s Regular Account, Tax-Deferred Rollover


Contributions Account, Roth Rollover Contributions Account, Tax-Deferred Contributions Account, Roth Contributions Account and Voluntary Contributions Account as of the date of completion of the liquidation.

9.04    Partial Termination of Plan. In the event of partial termination of the Plan, as determined in the complete and unfettered discretion of the Committee, the appropriate portion of the Fund shall be allocated and treated in accordance with Section 9.03 above.

9.05    Failure to Contribute. The failure of the Employer to contribute to the Fund for any Plan Year when no contribution is required shall not of itself be a discontinuance of contributions to the Fund by the Employer.

9.06    Merger and Consolidation of Plan. Transfer of Plan Assets. In the case of any merger or consolidation with, or transfer of assets and liabilities to, any other plan, provisions shall be made so that each Participant in the Plan on the date thereof (if the Plan then terminated) would receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit he or she would have been entitled to receive immediately prior to the merger, consolidation or transfer (if the Plan then terminated). Further, a merger, consolidation or transfer of assets shall be made only if resolutions of the Board of Directors and the board of directors of the other plan shall authorize such merger, consolidation or transfer and such other plan and fund are qualified under Code Sections 401(a) and 501(a).

9.07    Substitution of Successor Employer. In the event of the dissolution, merger, consolidation or reorganization of the Employer, provision may be made by which the Plan will be continued by any successor and, in that event, such successor shall be substituted for the Employer under the Plan. Resolutions of the Board of Directors and board of directors of any new or successor employer shall include an assumption of Plan liabilities by the successor, and the successor shall have all of the powers, duties and responsibilities of the Employer under the Plan.

9.08    Distribution Upon Sale. Unless the provisions of Section 9.07 are applicable, all contributions and income attributable thereto, may be distributed as soon as administratively feasible:

(a)    To Participants after the sale to an entity that is not an Affiliated Employer, of substantially all the assets used by the Employer in the trade or business in which a Participant is employed; and

(b)    To Participants employed by a subsidiary of the Employer after the sale, to an entity that is not an Affiliated Employer, of an Affiliated Employer’s interest in such subsidiary.

For the purpose of this Section 9.08, a sale of eighty-five percent (85%) of the relevant assets shall be deemed a sale of substantially all assets. Furthermore, distributions can be made to separated Participants after a sale under circumstances specifically provided for by published IRS guidelines applicable to all business entities.

9.09    Plan Termination Distribution Availability. For purposes of determining whether the Employer maintains an alternative defined contribution plan (described in Treas. Regulation Section 1.401(k)-1(d)(4)(i)) that would prevent the Employer from distributing Tax-Deferred Contributions and Roth Contributions (and other amounts, such as Qualified Nonelective Contributions, that are subject to the distribution restrictions that apply to Tax-


Deferred Contributions and Roth Contributions) from a terminating 401(k) plan, an alternative defined contribution plan does not include an employee stock ownership plan defined in Code Sections 4975(e)(7) or 409(a), a simplified employee pension as defined in Code Section 408(k), a SIMPLE IRA plan as defined in Code Section 408(p), a plan or contract that satisfies the requirements of Code Section 403(b), or a plan that is described in Code Sections 457(b) or (f).
















































ARTICLE X
MISCELLANEOUS

10.01    Contributions Not Recoverable. Except where contributions are required to be returned to the Employer or a Participant as permitted by the provisions of the Plan or required by ERISA or the Code, it shall be impossible for any part of the principal or income of the Fund to be used for, or diverted to, purposes other than the exclusive benefit of such Participants or their Beneficiaries; provided, however, that notwithstanding this or any other provision of this Plan, the Employer shall be entitled, subject to the conditions established under Internal Revenue Service Ruling 91-4, to recover any contributions made to the Fund:

(a)    If such contributions were conditioned on the initial qualification of the Plan and;

(i)    The Commissioner of Internal Revenue, or his or her delegate, makes an initial determination, with respect to the exempt status of the Fund for Federal income tax purposes and the deductibility of contributions by Employer for its income tax purposes, that the Plan does not meet the requirements of the Code with the result that the Fund is not exempt from Federal income tax and the contributions of the Employer to the Fund are not deductible in determining its Federal income tax; and

(ii)    The application for determination relating to the initial qualification is filed by the due date of the Employer’s return for the taxable year in which the Plan is adopted; and

(iii)    The contribution is returned within one (1) year of the denial of the contribution; or

(b)    In error as a result of a mistake in fact; or

(c)    Conditioned upon the contribution being allowed as a deduction for Federal income tax purposes and such deduction is disallowed; or

(d)    Remaining in the Suspense Account after termination of the Plan which cannot be allocated to Participants because of the provisions of Article IV.

(e)    The permissible recovery under (b) must be made within one (1) year from the date the contribution was made to the Plan, and under (c) must be made within one (1) year from the date of disallowance of tax qualification or tax deduction.

(f)    Reversions due to a mistake of fact or the disallowance of a deduction with respect to a contribution that was conditioned on its deductibility shall be permitted only if the surrounding facts and circumstances indicate that the contribution of the amount that subsequently reverts to the Employer is attributable to a good faith mistake of fact or, in the case of the disallowance of the deduction, a good faith mistake in determining the deductibility of the contribution.



(g)    The maximum amount that may be returned to the Employer in the case of a mistake of fact or the disallowance of a deduction is the excess of (i) the amount contributed, over, as relevant, (ii) (A) the amount that would have been contributed had no mistake of fact occurred, or (B) the amount that would have been contributed had the contribution been limited to the amount that is deductible after any disallowance by the Internal Revenue Service.

(h)    Earnings attributable to the excess contribution may not be returned to the Employer, but losses attributable to such contribution shall reduce the amount returned.

(i)    If the return of the amount attributable to the mistaken or nondeductible contribution would cause the Account of any Participant to be reduced to an amount which is less than the amount which would have been in the Account of such Participant had the mistaken or nondeductible amount not been contributed, the amount returned to the Employer shall be limited so as to avoid such reduction. Notwithstanding the preceding sentence, in the case of a reversion due to initial disqualification of the Plan, the entire assets of the Plan attributable to Employer Contributions may be returned to the Employer.

10.02    Employment Rights. The Plan is not a contract of employment. Participation in the Plan shall not give any Employee or any other person (a) the right to be retained in the employ of the Employer; (b) any right or claim to any interest in the Plan, unless the right or claim has specifically accrued under the Plan; or (c) any legal or equitable right against the Employer, the Committee or the Funding Agent, except as provided herein. The Employer reserves the right to dismiss (with or without cause) any Employee without any liability for any claim either against the Fund, except to the extent provided herein, or against the Committee or the Employer. It is a condition of the Plan, and each Participant expressly agrees by his or her participation herein, that each Participant shall look solely to the assets held in the Fund for the payment of any benefit to which he or she is entitled under the Plan.

10.03    Receipt or Release. Any payment to a Participant, former Participant, or his or her Beneficiary in accordance with the provisions of this Plan shall, to the extent thereof, be in full satisfaction of all claims against the Funding Agent, the Committee and the Employer, and the Committee or Funding Agent may require such Participant, former Participant, or Beneficiary, as a condition precedent to such payment, to execute a receipt and release to such effect.

10.04    Alienation. None of the benefits, payments, proceeds or claims of any Participant, former Participant, or Beneficiary shall be subject to any claim of any creditor and, in particular, the same shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or involuntary. Any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, garnish, levy or otherwise dispose of or execute upon any right or benefit payable hereunder shall be void. The Fund shall not in any manner be liable or subject to the debts, contracts, liabilities, engagements or costs of any Participant entitled to benefits hereunder, and such benefits shall not be considered an asset of the Participant in the event of his or her insolvency or bankruptcy. This provision shall not prevent the Plan from complying with the terms of a “qualified domestic relations order” as defined in Code Sections 401(a)(13) and 414(p) so long as such compliance will not adversely affect the qualified status of the Plan.



10.05    Controlling Law. This Plan shall be construed, administered, and governed in all respects under applicable federal law, and to the extent that federal law is inapplicable, under the laws of the State of Florida; provided, however, that if any provision is susceptible to more than one interpretation, such interpretation shall be given thereto as is consistent with the Plan being a qualified plan within the meaning of Code Section 401. If any provisions of this instrument shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective.

10.06    Text Prevails over Captions. The headings and subheadings of the Articles and Sections of this Plan are included herein solely for convenience of reference, and if there be any conflict between such headings and subdivisions and the text of this Plan, the text shall control.

10.07    Counterparts. This Plan has been executed in several counterparts, each of which shall be deemed an original, and said counterparts shall constitute but one and the same instrument, which may be sufficiently evidenced by any one counterpart.

10.08    Successors and Assigns. This Plan shall inure to the benefit of, and be binding upon, the parties hereto and their successors and assigns.

10.09    Electronic Retention of Documents. To the extent permitted by law, whenever a writing is required, it may be made and retained in electronic form. Furthermore, to the extent the document must be signed and/or notarized, it can be done and retained in electronic form.

10.10    Claims for Benefits and Notice of Right to Defer.

(a)    The Committee or its delegate shall notify Participants and, where appropriate, Beneficiaries of their right to claim benefits under the claims procedures, and shall provide the name of the person or persons with whom such claims should be filed. Any person claiming a benefit under the Plan (a “Claimant”) shall present his or her request in writing to the Committee or its delegate. In addition, for any distribution notice issued, the description of a Participant’s right, if any, to defer receipt of a distribution will also describe the consequences of failing to defer receipt of the distribution. For notices issued before the ninetieth (90th) day after the issuance of Treasury Regulations (unless future Revenue Service guidance otherwise requires), the notice will include a description indicating the investment options available under the Plan (including fees) that will be available if the Participant defers distribution.

(b)    Nothing in this Section 10.10 shall preclude an authorized representative of a Claimant from acting on behalf of such Claimant in pursuing a benefit claim or appeal of an “adverse benefit determination” under the Plan. The Committee shall establish reasonable procedures for determining whether an individual has been authorized to act on behalf of such Claimant. Such authorization shall be made by filing an authorization form with the Committee (or by completing such other administrative procedures as may be required by the Committee) on a timely basis prior to the date such authorization is to be effective.

(c)    Within a reasonable period of time, but not later than ninety (90) days after receipt of a claim for benefits, the Committee or its delegate shall


notify the Claimant of any adverse benefit determination on the claim, unless special circumstances require an extension of time for processing the claim. In no event may the extension period exceed ninety (90) days from the end of the initial ninety (90) day period. For claims involving a disability determination, the Committee or its delegate shall notify the Claimant of any adverse benefit determination within forty-five (45) days after receipt of such claim for disability benefits. In no event may the extension period for disability claims exceed sixty (60) days from the end of the initial forty-five (45) day period. If an extension is necessary, in either case, the Committee or its delegate shall provide the Claimant with a written notice to this effect prior to the expiration of the initial period. The notice shall describe the special circumstances requiring the extension and the date by which the Committee or its delegate expects to render a determination on the claim. If such notification is not given within such period, the claim will be considered denied as of the last day of such period and the Claimant may request a review of his or her claim.

(d)    In the case of an adverse benefit determination, the Committee or its delegate shall provide to the Claimant written or electronic notification setting forth in a manner calculated to be understood by the Claimant:

(i)    the specific reason or reasons for the adverse benefit determination;

(ii)    reference to the specific Plan provisions on which the adverse benefit determination is based;

(iii)    a description of any additional material or information necessary for the Claimant to perfect the claim and an explanation of why the material or information is necessary; and

(iv)    a description of the Plan’s claim review procedures and the time limits applicable to such procedures, including a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA following an adverse final benefit determination on review and in accordance with Section 10.11 below.

(e)    In the case of an adverse benefit determination for disability benefits, the Committee or its delegate shall provide to the Claimant the notification described in the above subsection (d) and the following information:

(i)    A discussion of the decision, including an explanation of the basis for disagreeing with or not following: (A) the views presented by the Claimant to the Committee or its delegate of health care professionals treating the Claimant and vocational professionals who evaluated the Claimant; (B) the views of medical or vocational experts whose advice was obtained on behalf of the Committee or its delegate in connection with a Claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination; and (C) a disability determination regarding the Claimant presented by the


Claimant to the Committee or its delegate made by the Social Security Administration;

(ii)    If an internal rule, guideline, protocol, or similar criteria was relied upon in making the decision, either a copy of that document or a statement that such document was relied upon and that a copy shall be furnished (free of charge) upon request, or if none exists, a statement that no specific internal rule, guideline, protocol, or other similar criterion exists which could have been relied upon in making the adverse determination; and

(iii)    A statement that the Claimant is entitled to receive upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant’s claim for benefits.

10.11    Appeals Procedure.

(a)

(i)    Any Claimant, or such Claimant’s duly authorized representative, whose application for benefits is denied, in whole or in part, may appeal from such denial to the Committee or its delegate for a review of the decision by submitting to the Committee or its delegate within sixty (60) days after receiving written notice from the Committee or its delegate of the denial of the claim a written statement:

(A)    Requesting a review of the application for benefits by the Committee or its delegate;

(B)    Setting forth all of the grounds upon which the request for review is based and any facts in support thereof; and

(C)    Setting forth any issues or comments, documents, records and other information relating to the claim for benefits which the Claimant deems relevant to the application.

The Claimant shall also be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant’s claim for benefits.

(ii)    The Committee or its delegate shall make a full and fair review of each such application and any written materials submitted by the Claimant or the Employer in connection therewith and may require the Employer or the Claimant to submit within thirty (30) days after a written notice by the Committee or its delegate, such additional facts, documents or other evidence as is deemed necessary or advisable in the sole discretion of the Committee or its delegate in making such a review. On the basis of the review, the Committee or its delegate shall make an independent determination of the Claimant’s eligibility for benefits under the


Plan. The Committee shall act upon each such application within sixty (60) days after either receipt of the Claimant’s request for review by the Committee or its delegate or receipt of any additional materials reasonably requested by the Committee or its delegate from such Claimant, whichever occurs later. However, where special circumstances make a longer period for decision necessary or appropriate, the Committee’s decision may be postponed on written notice to the Claimant (prior to the expiration of the initial sixty (60) day period) for an additional sixty (60) days. In no event shall the Committee’s decision be rendered more than one-hundred and twenty (120) days after receipt of the request for review; provided however, in the event the Claimant fails to submit information necessary to make a benefit determination on review, such period shall be tolled from the date on which the extension notice is sent to the Claimant until the date on which the Claimant responds to the request for additional information.

(iii)    The decision of the Committee or its delegate on any application for benefits shall be final and conclusive upon all persons if supported by substantial evidence in the record. If the Committee or its delegate denies an application in whole or in part, the Committee or its delegate shall give written notice of the decision to the Claimant setting forth the specific reasons for such denial, stated in a manner calculated to be understood by the Claimant, and specific references to the pertinent Plan provisions on which the Committee’s or its delegate’s decision is based. The decision on review shall also include (i) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, or other information relevant to the Claimant’s claim for benefits; (ii) a statement describing any voluntary appeal procedures offered by the Plan; and (iii) a statement of the Claimant’s right to bring an action under Section 502(a) of ERISA.

(b)

(i)    With respect to claims involving a disability determination, a Claimant whose claim is denied in whole or in part by the Committee or its delegate may, within one hundred and eighty (180) days after receipt of denial of the claim submit a written request for review by the Committee or its delegate. The review of the initial decision concerning a claim shall be performed by someone who is neither the original decision maker nor the subordinate of the original decision maker. In reviewing the initial decision, the decision maker shall not give any deference to the initial decision and he or she shall consider all information relevant to the claim, not just information relied upon (or available) when the original decision was made. The decision maker shall also consider any information submitted by the Claimant. If the benefit determination is based in whole or in part on a medical judgment, the decision maker reviewing the claim shall consult with a health care professional who has appropriate training and experience in


the field of medicine involved in the medical judgment issue; provided that such health care professional shall be an individual who is neither an individual who was consulted in connection with the initial claim denial that is the subject of the appeal nor the subordinate of any such individual. Upon request, the Committee or its delegate shall disclose to the Claimant the identity of the medical or vocational experts whose advice was obtained by the Committee or its delegate in connection with the review, even if the advice was not relied upon in making the final decision.

(ii)    Before an adverse benefit determination on review involving a determination of disability is issued, the Claimant shall be provided, free of charge, as soon as possible and sufficiently in advance of the date on which such notice is required to be provided: (1) any new or additional evidence considered, relied upon or generated by the Plan, the insurer or other person making the benefit determination in connection with claim; and (2) any new or additional rationale on which an adverse benefit determination on review will be based.

(iii)    The decision on review will be made within forty-five (45) days after the request for review is received by the Committee or its delegate (or within up to ninety (90) days, if special circumstances require an extension of time for processing the request, such as an election by the Committee or its delegate to hold a hearing, and if written notice of such extension and circumstances is given to such person within the initial forty-five (45) day period). If the decision on review is not made within such period, the appeal will be considered denied.

(iv)    The decision of the Committee or its delegate on any application for benefits shall be final and conclusive upon all persons if supported by substantial evidence in the record. For appeals involving a disability determination, the notice to the Claimant shall include the information listed in subsection (a)(iii) above and the following information:

(A)    A discussion of the decision, including an explanation of the basis for disagreeing with or not following: (1) the views presented by the Claimant to the Committee or its delegate of health care professionals treating the Claimant and vocational professionals who evaluated the Claimant; (2) the views of medical or vocational experts whose advice was obtained on behalf of the Committee or its delegate in connection with a Claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination; and (3) a disability determination regarding the Claimant presented by the claimant to the Committee or its delegate made by the Social Security Administration;



(B)    If an internal rule, guideline, protocol, or similar criteria was relied upon in making the decision, either a copy of that document or a statement that such document was relied upon and that a copy shall be furnished (free of charge) upon request, or if none exists, a statement that no specific internal rule, guideline, protocol, or other similar criterion exists which could have been relied upon in making the adverse determination; and

(C)    In the statement regarding the Claimant’s right to bring an action under Section 502(a) of ERISA, any applicable contractual limitations period that applies to the Claimant’s right to bring such an action, including the calendar date on which the contractual limitations period expires for the claim.

(c)     Before a Claimant pursues any legal remedy including without limitation a suit for any benefits claim under the Plan, it is mandatory and necessary that the Claimant use exclusively the benefits claim and review procedure described above until this procedure is completely exhausted and an adverse final benefit determination is communicated to the claimant in writing. In addition, no lawsuit may be filed more than one-hundred-eighty (180) days following the date on which the adverse final benefit determination is communicated to the Claimant in writing, the determination of which date shall be in the Committee’s or its delegate’s sole and absolute discretion except to the extent that such determination shall be consistent with the terms of the Plan and applicable law.

(d)     Notwithstanding anything in the foregoing to the contrary, in addition to its authority to deny or approve a specific claim for benefits, and in the interest of minimizing litigation costs which could reduce the accrued benefits of other Participants, the Committee or its delegate, pursuant to competent legal advice, may resolve a benefit dispute based on the parties evaluation of the relative merits of the claims rather than on a formula based on any type of mathematical calculation.

(e)     It is intended that the claims procedure of this Plan be administered in accordance with the claims procedure regulations of the Department of Labor set forth in 29 C.F.R. § 2560.503.1. Accordingly, to the extent such regulations so require, determinations as to whether Plan provisions regarding Disability apply to a Participant shall be made in accordance with the Department of Labor’s claims procedure regulations applicable to claims for disability benefits.

10.12    Arbitration of Claims

(a) General. To the fullest extent permitted by applicable law, and in consideration of any rights, benefits, or entitlements provided under or pursuant to the Plan, and as a condition precedent to participation and continuing participation in the Plan, the participants, employees, beneficiaries, settlors, trustees, administrators, and any party making a claim or seeking relief arising under, directly or indirectly related to, or in


consequence of the Plan, shall be bound by this Arbitration of Claims provision.

Any claim, dispute, or controversy of any kind asserted by a current or former participant, current or former beneficiary, current or former fiduciary, alternate payee, or any of their respective assignees, agents, representatives, assigns, trustees, receivers, or anyone acting on their behalf (collectively referred to as ‘Claimant’ in this Subsection) that arises out of, implicates, and/or relates to the Plan, including, without limitation, any: (a) claim for benefits under the Plan pursuant to ERISA Section 502(a)(1)(B) (following any required exhaustion of administrative remedies); (b) claim pursuant to ERISA Section 502(a)(2); or (c) claim pursuant to ERISA Section 502(a)(3); (d) claim for any ERISA statutory violation of any kind, including for failure to timely provide notices, documents or information required by ERISA, pursuant to ERISA Section 502(c); or (e) claim under any other body of law (collectively ‘Claim’), will be referred to and finally resolved by confidential binding arbitration.

Arbitration shall be administrated by the American Arbitration Association (‘AAA’) and conducted in accordance with the AAA’s Employment Arbitration Rules and Mediation Procedures (available at www.adr.org) (‘AAA Rules’), except to the extent modified by this Section 10.12. A Claimant may obtain a copy of the AAA Rules at any time upon written request to the Employer or its delegates or by reviewing the rules at www.adr.org.

This Arbitration of Claims provision shall apply whether or not the Claimant was a current employee, participant, beneficiary, trustee, assignee, agent, representative, assign, receiver, or fiduciary when the alleged act, error, or omission occurred or was discovered, when the action was initiated, when the action accrued, when any injury or loss occurred or was discovered, and whether the Claimant has received a distribution of benefits due or allegedly due.

(b)     Request for Arbitration. A Claimant may initiate arbitration by filing a demand for arbitration with the AAA. Any demand must be submitted to arbitration within the applicable statutory or contractual period of limitations. Claims for review of adverse benefit decisions must be made within 180 days of the date the final adverse benefit decision was issued.

A Claimant must assert all arbitrable Claims based upon, arising out of, or in consequence of the same underlying alleged facts in the same arbitration and may not split Claims. For example, if a Claimant wishes to pursue both a Claim for benefits under ERISA Section 502(a)(1)(B) and a Claim for breach of fiduciary duty under ERISA Section 502(a)(2) or ERISA Section 502(a)(3), the claimant must first exhaust the Plan’s Claims and Appeal Procedures and then assert such claims in one demand for arbitration.

(c)     Selection of Arbitrator. If Claims raised by a Claimant are brought solely pursuant to ERISA Section 502(a)(1)(B) and/or ERISA Section 502(c), then the Claims will be submitted to and decided by a single


arbitrator. All other Claims must be submitted to and decided by a panel of three arbitrators.

For Claims submitted to a single arbitrator, the parties will endeavor to agree to a neutral arbitrator with familiarity with ERISA benefit claims and related claims to the extent practicable. For Claims submitted to a panel of three arbitrators, each party shall appoint one arbitrator within 30 days of the demand for arbitration, and the two arbitrators selected by the parties will then, within 30 days after their appointment, select the third arbitrator from the applicable AAA roster.

The parties and the arbitrators will exercise best efforts to select arbitrators with ERISA benefit claims and ERISA breach of fiduciary claims experience, to the extent practicable. If arbitrator(s) cannot be selected within 30 days of the filing of an arbitration demand, such arbitrator(s) will be selected in accordance with the AAA Rules. ‘Arbitrator’ shall mean the individual arbitrator or panel of arbitrators selected to decide Claims as set forth in this Subsection.

(d)     Notice of Claim. Any Claim shall first be addressed by direct negotiation between the Claimant and the Plan. Prior to filing an arbitration proceeding, the Claimant shall provide the Plan with written notice of the Claim (‘Notice of Claim’) containing a detailed description of the matter in controversy. The Claimant and the Plan will attempt to resolve the Claim in good faith. Should the Claim not be resolved within 30 days of the Plan’s receipt of the Notice of Claim, the Participant or Claimant may file a demand for arbitration proceeding as set forth in this Section 10.12. The 30-day requirement may be modified through unequivocal, express, written agreement by the Claimant and the Plan. In all instances, however, the Claimant must file an arbitration proceeding within the timeframes set forth in Section 10.12(b).

(e)     Governing Law. With respect to any Claim, the Arbitrator shall apply the jurisprudence of ERISA as if brought in the United States District Court for the Central District of California, Western Division and shall follow the law established by the United States Court of Appeals for the Ninth Circuit and the Supreme Court of the United States.

(f)     Arbitration Venue; Standard of Review. Any arbitration proceeding will be held in Los Angeles, California or such other venue as may be selected by mutual agreement of the parties; provided, however, that the same standards of review will apply to the review of any Claim hereunder as would apply had such Claim been filed in the United States District Court for the Central District of California, Western Division (e.g., any discretionary decision or action will be reviewed under an ‘abuse of discretion’ standard). Any petition to confirm or vacate the award rendered by the Arbitrator, and any other appeal or subsequent filing seeking to enforce, modify or otherwise seek judicial relief with respect to the award rendered by the Arbitrator may be brought only in the United States District Court for the Central District of California, Western Division.



(g)     Arbitration Award. The award of the Arbitrator(s) will be in writing, with reasonable explanation of the basis for the decision and award. The Arbitrator’s decision will be confidential, final and binding in accordance with the AAA Rules. The judgment on the final award rendered by the Arbitrator may be entered in any court having jurisdiction thereof and will be res judicata as to all Claims that the Claimant asserted or could have asserted in the demand for arbitration. The Arbitrator’s authority shall be limited to deciding the case submitted by the individual Claimant in the arbitration.

(h)     Fees and Expenses. Except as may be awarded by the Arbitrator in a final award, or as otherwise required by ERISA, each party will bear the expense of their own fees and costs. The Arbitrator shall have authority to award attorney’s fees and costs pursuant to ERISA Section 502(g) to the same extent a court has such authority.

(i)     Waiver of Class, Collective, and Representative Actions. To the fullest extent permitted by applicable law:

(i)    The Claimant and any actual or purported participant, beneficiary, assignee, agent, or representative, may not bring a representative, class, or collective action on behalf of any others, including without limitation other Claimants, participants, or beneficiaries. Any Claim in arbitration must be brought on an individual basis. Furthermore, the Arbitrator and/or the AAA may not consolidate or join any claims without the express consent of all parties.

(ii)    Arbitrator(s) shall have the authority to award monetary relief solely with respect to any alleged monetary losses in the individual Claimant’s individual defined contribution account under the Plan and may not award monetary relief to or for the benefit of any other participants or beneficiaries. With respect to any Claim brought under ERISA Section 502(a)(2) and/or ERISA Section 409, a Claimant may obtain losses to the Plan measured by the alleged monetary losses to the individual Claimant’s individual defined contribution account. The Claimant waives, forfeits, and forever relinquishes the right to bring a Claim for monetary damages, losses, or injury to any individual Plan account other than the Claimant’s account.

(iii)    With respect to equitable, injunctive, and non-monetary relief that may be available under ERISA, to the fullest extent permitted by ERISA, the Arbitrator(s) must limit such relief solely to the individual Claimant. If any portion of the Arbitration provision or Class Action Waiver is found to prohibit a Claimant from obtaining any relief under ERISA that the Claimant would be able to obtain on an individual basis, the Arbitration provision and Class Action Waiver shall not be deemed void; rather, the Arbitrator(s) shall have the authority to award such relief.

(iv)    This Arbitration provision and Class Action Waiver shall not limit a Claimant’s right, if any exists under ERISA, to seek, in the


Claimant’s individual capacity, relief that may be awarded under ERISA to the Claimant in the Claimant’s capacity as an individual who is not bringing a class or collective action.

(v)    Every actual or purported participant, beneficiary, assignee, agent, and representative waives the right to commence, be a party to, or be an actual or putative class member of any class, collective or representative action arising out of or relating to the Plan (‘Class Action Waiver’).

(vi)    Any challenge to this Class Action Waiver may be brought only in the United States District Court for the Central District of California, Western Division, and not in any other judicial or arbitration forum. If a Claimant brings a challenge to the Class Action Waiver, any purported arbitration on a Plan-wide, class, collective, or representative basis shall be stayed pending determination by the court of said challenge to the Class Action Waiver. If this Class Action Waiver is found to be unenforceable by a final and binding judgment of a federal court, then any Claim shall be filed and adjudicated in the United States District Court for the Central District of California, Western Division and not in arbitration.

(j)    Savings Clause. For avoidance of doubt, Section 10.12 is intended to make mandatory individual arbitration apply to the maximum extent permissible under ERISA; provided however, that in the event the Class Action Waiver is found to be unenforceable, then any Claim shall be filed and adjudicated in the United States District Court for the Central District of California, Western Division and not in arbitration. If any other provision of this arbitration provision (aside from the Class Action Waiver) is found impermissible or unenforceable, the arbitration process as mandated in Section 10.12 is still required with the minimum change necessary to allow the arbitration requirement to be permissible and/or enforceable.

(k)    Jurisdiction of Arbitrator. If a claimant disputes whether the Claim is arbitrable, the dispute will be decided by the United States District Court for the Central District of California, Western Division and not by the Arbitrator. To the extent the court finds a Claim not arbitrable, suit may only be filed and adjudicated in the United States District Court for the Central District of California, Western Division.

(l)    Confidentiality. In accordance with the AAA Rules, any arbitration of a Claim will be strictly confidential. Neither the claimant nor Arbitrator may disclose any information relating to an arbitration proceeding without the prior written consent of the Employer or its delegates. This confidentiality provision will apply to all aspects of the arbitration proceeding including, without limitation, discovery, testimony, other evidence, briefs, and the award. The Arbitrator and the parties shall maintain the confidentiality of arbitration, including filing under seal (or taking all appropriate steps to secure permission to file under seal) any pleading seeking to confirm or vacate the arbitration award, to enforce


arbitration or otherwise relating in any way to the arbitration. In the event of a breach or threatened breach of this confidentiality provision, the Employer or its delegates or, if applicable, other respondent, may seek temporary, preliminary, and/or permanent injunctive relief to prevent such breach or threatened breach, as well as any damages suffered by the Employer, its delegates, or other respondent. In the event the Employer, its delegates, or, if applicable, other respondent, brings an action to enforce this confidentiality provision and receives any remedy (whether temporary or permanent), the Claimant or Arbitrator(s) responsible for such breach or threatened breach shall pay the attorneys’ fees and expenses incurred in connection with such enforcement action.










































ARTICLE XI
PARTICIPATING EMPLOYERS

11.01    Adoption by Affiliated or Non-Affiliated Employers. With the consent of Mercury, any Affiliated or Non-Affiliated Employer may adopt this Plan and all of the provisions hereof, and participate herein and be known as a Participating Employer, by properly executing a document evidencing said intent and will of such Participating Employer.

11.02    Requirements of Participating Employers.

(a)    Each Participating Employer shall be required to use the same Funding Agent as selected pursuant to Section 1.02(x).

(b)    The Funding Agent, subject to the provisions of Section 3.13, shall commingle, hold and invest as one, all contributions received pursuant to Article III.

(c)    The transfer of any Participant from or to an Employer participating in this Plan, whether he or she be an Employee of the Employer, an Affiliated Employer, or a Non-Affiliated Employer, shall not affect such Participant’s rights under the Plan, and all amounts credited to such Participant’s Accounts, as well as his or her accumulated Years of Vesting Service with the transferor or predecessor, and his or her length of participation in the Plan, shall continue to his or her credit. Such transfer shall not be considered a termination of service.

(d)    All rights and values forfeited by termination of employment shall inure only to the benefit of the Participants of the Employer or Participating Employer by which the forfeiting Participant was employed, except if the forfeiture is for an Employee whose Employer is an Affiliated Employer, then said forfeiture shall inure to the benefit of the Participants of those Employers who are Affiliated Employers. Should an Employee of one (“First”) Participating Employer be transferred to another (“Second”) Participating Employer, such transfer shall not cause his or her account balance (generated while an Employee of “First” Employer) in any manner, or by any amount to be forfeited. Such Employee’s account balance for all purposes of the Plan, including length of service, shall be considered as though he or she had always been employed by the “Second” Employer and as such had received contributions, forfeitures, earnings or losses, and appreciation or depreciation in value of assets totaling the amount so transferred.

(e)    Any expenses of the Plan which are to be paid by the Plan or the Employer shall be paid in the same proportion that the total amount standing to the credit of all Participants employed by such Participating Employer bears to the total standing to the credit of all Participants in the Plan.

11.03    Designation of the Employer as Agent. With respect to all of its relations with the Funding Agent and Administrator for the purpose of this Plan, each Participating Employer shall be deemed to have designated irrevocably the Employer as its agent. Unless the context of


the Plan clearly indicates the contrary, the word “Employer” shall be deemed to include each Participating Employer as related to its adoption of the Plan.

11.04    Employee Transfers. It is anticipated that an Employee may be transferred between Participating Employers. In the event an Employee transfers between Participating Employers, the Employee involved shall carry with him or her accumulated Service and eligibility. No such transfer shall effect a termination of employment hereunder, and the Participating Employer to which the Employee is transferred shall thereupon become obligated hereunder with respect to such Employee in the same manner as was the Participating Employer from whom the Employee was transferred.

11.05    Participating Employer Contributions. All contributions made by a Participating Employer, as provided for in this Plan, shall be determined separately by each Participating Employer, and shall be paid to and held by the Funding Agent for the exclusive benefit of the Employees of such Participating Employer and the Beneficiaries of such Employees, subject to all the terms and conditions of this Plan. On the basis of the information furnished by the Employer, the Committee shall keep separate books and records concerning the affairs of each Participating Employer hereunder and as to the Accounts and credits of the Employees of each Participating Employer.

11.06    Amendment. Amendment of this Plan by the Employer, at any time, pursuant to Section 9.01, shall be deemed to be an amendment by each Participating Employer, provided, however, that if such amendment affects the individual duties or liabilities of any Participating Employer, such amendment shall not be effective as to such Participating Employer until such Participating Employer has submitted a properly executed document evidencing its consent to such amendment.

11.07    Participating Employer Discontinuance. Any Participating Employer shall be permitted to discontinue or revoke its participation in the Plan. At the time of any such discontinuance or revocation, satisfactory evidence thereof and of any applicable conditions imposed shall be delivered to the Committee. The Committee shall thereafter cause to be transferred, delivered and assigned Plan assets allocable to the participants of such Participating Employer to such new Funding Agent as shall have been designated by such Participating Employer. If no successor is designated, the Committee shall retain such assets for the Employees of said Participating Employer, pursuant to the provisions of the Funding Instrument. In no such event shall any part of the corpus or income of the Plan as it relates to such Participating Employer be used for or diverted for purposes other than for the exclusive benefit of the Employees of such Participating Employer.

11.08    Committee Authority. The Committee shall have authority to make any and all necessary rules or regulations binding upon all Participating Employers and all Participants to effect the purposes of this Article XI.

11.09    Compliance Testing. For purposes of performing Top Heavy testing under Code Section 416, coverage testing under Code Section 410(b) and Non-Discrimination testing under Code Sections 401(k) and 401(m), each Participating Employer who is not an Affiliated Employer is considered to maintain its own plan.







IN WITNESS WHEREOF, the Employer has caused this Plan to be executed by its duly authorized officers this 1st day of January 2026.

MERCURY GENERAL CORPORATION


By: /s/ Theodore Stalick
Title: SVP & CFO











































APPENDIX A
PARTICIPATING EMPLOYERS
effective as of January 1, 2025


Employer NameEIN
Mercury Insurance Services LLC
95-4831771




Exhibit 10.10


MANAGEMENT AGREEMENT

THIS MANAGEMENT AGREEMENT (the “Agreement”) is made and entered into on this day of January, 2026 by and between MERCURY INSURANCE SERVICES, LLC, a California limited liability company (“Manager”) and MERCURY INSURANCE COMPANY OF TEXAS, a Texas corporation (the “Company”).

WHEREAS, the parties are affiliated through common ownership and control, and desire to enter into this Agreement setting out their respective rights and duties relating to the management of the Company by Manager,

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the parties agree as follows:

1. Effective Date. This agreement shall become effective on the 1st day of January, 2026, and shall remain in effect until terminated as provided herein.

2. Delegation of Management Duties. The Company hereby delegates to manager all of the rights and duties related to the management of the Company which Company is permitted to so delegate by the laws of the State of Texas. Such delegation shall be subject to the control and approval of the Board of Directors of the Company. This Agreement is not intended to supersede or replace the policy making decisions of, or the supervisory responsibilities of, the Board of Directors of the Company. The Company will oversee the functions and services provided to it by Manager and will monitor those functions at least annually for quality assurance.

The rights and duties delegated to Manager shall include, but not be limited to providing all services related to: administration; financial accounting; actuarial; investment; information systems management and data processing; human resources; underwriting insurance policies; settling and adjusting claims and other losses; defending lawsuits; establishing premium rates; establishing and choosing sales agents; determining agents’ commissions; preparing all records necessary for the conduct of the insurance business; and furnishing all forms, supplies and other equipment necessary for the conduct of the insurance business of the Company.

3. Management of the Company. The Manager agrees to provide all management and administrative services, including, but not limited to: administrative management; human resources; information systems management and data processing; legal; insurance operations; accounting; actuarial; financial management; auditing; investment of assets; printing and mail services; underwriting; claims adjusting; premium billing; and any other services as requested by the Company. Manager may not place business with the Company, but shall be authorized to accept and process on the Company’s behalf insurance policies produced and sold by other agents. Manager shall provide such services in accordance with the applicable laws and regulations in the jurisdictions in which the Company is licensed.

4. Salvage and Subrogation. To the extent requested by the Company, Manager shall assert and pursue salvage and subrogation claims on behalf of the Company, including all aspects of collection in connection with such claims. Manager shall remit the amounts recovered to the Company monthly, in accordance with the settlement terms applicable to reimbursements payable to Manager, as provided paragraph 7 below. Either the Manager or the Company may


offset the amounts owed by it against amounts owed to it by the other party under this Agreement or any other agreement between the parties

5. Payment of Operating Expenses. Manager agrees to pay on behalf of the Company all operating expenses, including, but not limited to: rent; supplies; salaries of all personnel; payroll-related expenses, including employment taxes; expenses relating to employment benefits; telephone; advertising; loss adjustment expenses as agreed between the parties; legal defense costs; court costs; costs related to loss analysis; financial accounting; premium collection costs; agent commissions and agent contingent commissions; agent-related fees, including but not limited to agency appointment fees; audit fees; investment counsel fees; and membership fees in trade associations. The Company shall have the right to pay any of its own expenses directly, notwithstanding this Agreement. The Company shall not advance any funds to the Manager except to pay for services defined in this Agreement.

In the event the Company incurs an expense on behalf of another company managed by Manager, then it shall be entitled to charge that company for such expenses either directly or seek reimbursement by Manager.

6. Expenses Paid by the Company. Notwithstanding the foregoing, the Company shall be responsible for the payment of the following expenses: management fees; premium taxes; losses; reserves for unpaid losses; reserves for unpaid loss adjustment expenses; assigned risk or similar assessments; Fair Plan, guaranty association or similar assessments; directors’ fees; reinsurance premiums; political contributions; premiums paid for insurance policies for which the Company is the beneficiary or owner; taxes of all types; and costs which may be levied on insurance companies by any regulatory authority or through the Tax Allocation Agreement between the member companies of the Mercury Insurance Group.

7. Management Fee. Manager shall be reimbursed monthly, on an actual cost basis without a profit factor, for all expenses incurred on behalf of the Company. Said reimbursement shall be paid monthly by the Company to the Manager within 60 days following the end of each month. Manager shall provide an annual accounting to the Company of all expenses incurred and reimbursed during the prior year to enable the Company to include such information in its financial statements. The indirect and shared expenses shall be allocated in accordance with SSAP No. 70.

8. Ownership of Records and Assets. The ownership and legal title to the books and records of the Company, including the insurance policies issued by the Company, insurance policy records, policy and claims data, legal records, and accounting records of the Company shall remain in and with the Company, and subject to the Company’s control, however Manager shall have access to such records at all times and the Company shall permit Manager to examine and copy any such data in the Company’s possession. The books and records of the Company include all books and records developed or maintained under or related to this Agreement. The Company shall have the right to conduct audits of the Manager’s operations, books, records, and accounts relating to the business conducted under this Agreement no more than once annually, upon reasonable advance notice to the Manager. All funds and invested assets of the Company are the exclusive property of the Company, held for the benefit of the Company and are subject to the control of the Company.

9. Termination. Either party may terminate this Agreement upon ninety (90) days prior written notice to the nonterminating party, although the parties may mutually agree to a shorter period of notice. Upon termination, Manager shall provide a final accounting to the Company for services provided prior to termination, and the Company shall pay such invoice


within sixty (60) days of receipt thereof. Manager has no right of automatic termination if the Company is placed in receivership pursuant to Texas Insurance Code Chapter 443.

10. Independent Contractor Status. The relationship of Manager to the Company shall be that of an independent contractor rather than employer and employee and nothing contained in this Agreement or in the rules and regulations of the Company shall be construed to create the relationship of employer and employee between Manager and the Company.

11. Applicable Law. This Agreement and the rights of the parties hereunder shall be governed by, construed and enforced in accordance with the laws of the State of Texas, including the laws governing the choice of law.

12. Assignment. This Agreement may not be assigned by either party except with the express written consent of the other party. Nothing in this Agreement is intended to confer upon any person other than the parties hereto, their permitted assigns and their successors, any rights or remedies under or by reason of this Agreement.

13. Binding Agreement. This Agreement shall be binding upon and inure to the benefit of the respective heirs, personal representatives, successors or assigns of the parties hereto.

14. Confidentiality. Each party agrees to treat any proprietary information obtained, as a consequence of this Agreement, regarding the other party, its clients, products, practices and personnel as confidential and proprietary in nature and not to be shared with any other entity without the express written prior permission of such party. The parties agree that a party aggrieved by a breach of this provision shall be entitled to injunctive relief, and any other remedies afforded by law.

15. Entire Agreement. This Agreement contains the entire Agreement of the parties hereto and no representations, inducements, promises, or Agreements, oral or otherwise, between the parties not embodied or incorporated herein shall be of any force of effect.

16. Indemnification. Manager shall indemnify and hold the Company harmless against any liability, costs, expenses, fines, losses, or damages, including attorney’s fees and costs, incurred in the defense or investigation of any claim, suit, proceeding or action of any kind arising out of any negligent, grossly negligent, or willful misconduct, or any intentionally illegal or wrongful act or omission by the Manager in providing services under this Agreement, or related to the Manager’s failure to act in accordance with all applicable state or federal law in connection with any transaction or provision covered by this Agreement. Each party shall promptly notify the other party of the existence of any claim, suit, proceeding or other matter as to which the indemnification obligations would apply. Each party shall make available all information and assistance that the other party may reasonably request.

17. Modification. This Agreement may only be amended by a written amendment or addendum executed by both parties hereto. Any amendments to this Agreement shall first be filed with the Texas Department of Insurance in accordance with Texas Insurance Code section 823.103.

18. Nonwaiver. No failure of either party to exercise any power or right given either party hereunder or to insist upon strict compliance by either party with its obligations hereunder, and no custom or practice of the parties at variance with the terms hereof, shall constitute a waiver of either party’s right to demand exact compliance with the terms hereof.



19. Notices. Except as noted, all notices and consents required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if and when delivered personally, transmitted by first class mail, postage prepaid, or sent by a nationally recognized express courier service, postage delivery charges prepaid, as follows:

To Manager: To Company:
Mercury Insurance Services, LLC Mercury Insurance Company of Texas
Attn: President Attn: President
4484 Wilshire Blvd. P.O. Box 728866
Los Angeles, CA Oklahoma City, OK 73132-8866

Either party may from time to time change its address for notices, by giving notice of a new address to the other party in accordance with this Section.

20. Receivership. If the Company is placed in receivership or seized by the Commissioner under Texas Insurance Code Chapter 443:

a.All the rights of the Company under the Agreement shall extend to the receiver or the Commissioner;

b.     All books and records developed or maintained under and related to this Agreement will immediately be made available to the receiver or Commissioner, and must be turned over to the receiver or Commissioner immediately upon request; and

c.     Manager will continue to maintain any systems, programs, or other infrastructure supporting this Agreement notwithstanding such seizure, and will make them available to the receiver or Commissioner, as applicable, for so long as Manager continues to receive timely payment for services rendered.

21. Severability. If any provision of this Agreement is construed to be invalid, illegal or unenforceable, then the remaining provisions of this Agreement shall not be affected thereby and shall be enforceable without regard thereto.


IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first written above.


MERCURY INSURANCE SERVICES, LLC MERCURY INSURANCE COMPANY OF                 
TEXAS

By: /s/ Theodore R. Stalick, SVP & CFO     By: /s/ Theodore R. Stalick, SVP & CFO



EXHIBIT 21.1

Subsidiaries of the Company
Name of the Entity State or Other Jurisdiction of Incorporation
   
Mercury Casualty Company California
Mercury Insurance Company California
Mercury Insurance Company of Illinois Illinois
Mercury Insurance Company of Georgia Georgia
Mercury Indemnity Company of Georgia Georgia
Mercury Indemnity Company of America Florida
California Automobile Insurance Company California
California General Underwriters Insurance Company, Inc. California
Mercury Insurance Services LLC California
Mercury County Mutual Insurance Company* Texas
American Mercury Insurance Company Oklahoma
Mercury Insurance Company of Texas Texas
Mercury Select Management Company, Inc. Texas
Auto Insurance Specialists LLC California
AIS Management LLC California
PoliSeek AIS Insurance Solutions, Inc. Illinois
Animas Funding LLC Delaware
Fannette Funding LLC Delaware
Orion Indemnity Company California
Mercury Plus Insurance Services LLCCalifornia
Mercury Information Technology Services LLCCalifornia
Mercury (Shanghai) Information Technology Services Co., Ltd.Shanghai, China
Upper Animas Holdings, LLCCalifornia

*    Controlled by Mercury General Corporation







EXHIBIT 23.1
Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the registration statement (Nos. 333-125460 and 333-202204) on Form S-8 and (No. 333-215344) on Form S-3ASR of our reports dated February 17, 2026, with respect to the consolidated financial statements of Mercury General Corporation and subsidiaries and the effectiveness of internal control over financial reporting.
                                                    /s/ KPMG LLP
Los Angeles, California
February 17, 2026


EXHIBIT 31.1
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Gabriel Tirador, certify that:
1.I have reviewed this annual report on Form 10-K of Mercury General Corporation;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: February 17, 2026 /s/ GABRIEL TIRADOR
 Gabriel Tirador, Chief Executive Officer


EXHIBIT 31.2
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Theodore Stalick, certify that:
1.I have reviewed this annual report on Form 10-K of Mercury General Corporation;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: February 17, 2026 /s/ THEODORE STALICK
 Theodore Stalick, Senior Vice President and Chief Financial Officer


EXHIBIT 32.1
Certification of Chief Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. §1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Mercury General Corporation (the “Company”) hereby certifies, to such officer’s knowledge, that:
(i)the accompanying Annual Report on Form 10-K of the Company for the period ended December 31, 2025 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: February 17, 2026 /s/ GABRIEL TIRADOR
 Gabriel Tirador, Chief Executive Officer
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. §1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.


EXHIBIT 32.2
Certification of Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. §1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Mercury General Corporation (the “Company”) hereby certifies, to such officer’s knowledge, that:
(i)the accompanying Annual Report on Form 10-K of the Company for the period ended December 31, 2025 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: February 17, 2026 /s/ THEODORE STALICK
 Theodore Stalick, Senior Vice President and Chief Financial Officer
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. §1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.