Why MCY Stock Is Crashing 20% Today

California-based property and casualty insurer Mercury General (MCY) is tumbling 20% today after the insurer warned that its losses from California’s wildfires would “exceed its reinsurance retention level of $150 million.” However, the company’s reinsurer is obligated to pay for $1.29 billion of losses for each natural disaster “after covered catastrophe losses exceed the Company’s retention of $150 million,” Mercury explained.

If Mercury’s reinsurer pays out the entire $1.29 billion, Mercury would have a “total reinstatement premium” of $101 million.

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Mercury’s Financial Data

Mercury’s market capitalization is $2.66 billion. The company generated $4.63 billion of revenue last year, while its operating income came in at $123.6 million.

On the balance sheet, it had total investments of $6 billion as of the end of the third quarter, along with long-term debt of $574 million. Its total liabilities came in at $6.3 billion.

Additional Background Information

The insurer noted that, with the wildfires continuing to burn, ” it will be some time before (it) has an estimate of the total losses caused by this event.”

AccuWeather now anticipates that the total damage from the disaster will come in at $135 billion to $150 billion.

Other property and casualty insurers are also dropping, with Progressive (PGR) giving back 1.5%, Allstate (ALL) retreating 7.5%, and Travelers (TRV) sinking 4.5%.

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Disclosure: None. This article is originally published at Insider Monkey.