LOS ANGELES, Feb. 7 /PRNewswire-FirstCall/ -- Mercury General Corporation
(NYSE: MCY) reported today net income of $74.1 million ($1.36 per share-
diluted), in the fourth quarter 2004 compared with $49.2 million ($0.90 per
share-diluted), in the same period for 2003. For the year, net income was
$286.2 million ($5.24 per share-diluted) in 2004 compared to net income of
$184.3 million ($3.38 per share-diluted) in 2003. Included in net income are
net realized investment gains, net of tax, of $4.2 million ($0.08 per share-
diluted) in the fourth quarter 2004 compared to net realized investment gains,
net of tax, of $3.8 million ($0.07 per share-diluted) for the fourth quarter
2003, and net realized investment gains, net of tax, of $16.3 million
($0.30 per share-diluted) for the entire 2004 year compared to net realized
investment gains, net of tax, of $7.3 million ($0.13 per share-diluted) for
2003.
Company-wide net premiums written were $674.2 million in the fourth
quarter 2004, a 14% increase over fourth quarter 2003, and $2.6 billion for
the year, a 16.7% increase over 2003. California net premiums written were
$495.0 million in the quarter, an increase of 2.7% over 2003, and $2.0 billion
for the year, a 6.4% increase over 2003. Non-California net premiums written
were $179.2 million in the quarter, a 63.5% increase over 2003, and
$640.4 million for 2004, a 67.4% increase over 2003. Non-California net
premiums written represented 26.6% of the Company's total fourth quarter net
premiums written, up from 18.5% in the fourth quarter of 2003.
The Company's combined ratio (GAAP basis) was 88.6% in the fourth quarter
of 2004 and 89.2% for the entire year compared with 94.1% and 94.0% for the
same periods in 2003. Positive development of approximately $55 million for
the year ended December 31, 2004 on the 2003 and prior accident year loss
reserves contributed to the improvement in the combined ratio. During the
fourth quarter, the Company reduced its estimate for losses from the Florida
hurricanes from approximately $24 million reported at September 30, 2004, to
approximately $22 million at December 31, 2004.
Net investment income of $29.3 million (after tax $25.2 million) in the
fourth quarter of 2004 increased by 11.3% compared to the same period in 2003.
The after-tax yield on investment income was 3.6% on average assets of
$2.8 billion (fixed maturities and equities at cost) for the quarter. This
compares with an after tax yield on investment income of 3.9% on average
investments of $2.4 billion (fixed maturities and equities at cost) for the
same period in 2003.
During the fourth quarter of 2004, the Company began writing private
passenger automobile insurance in the states of Michigan and Nevada, marking
the twelfth and thirteenth states in which the Company writes automobile
insurance.
During January 2005, the state of California experienced precipitation
levels that were significantly higher than average. Consequently, the number
of losses reported in the California homeowners line of business was more than
double the number reported in January 2004. The number of California
automobile losses reported in January 2005 was approximately 10% more than the
number reported in January 2004. As a result, given the January 2005 losses,
the Company anticipates that loss frequency will be higher in the first
quarter 2005 as compared to the first quarter 2004.
Mercury General Corporation and its subsidiaries are a multiple line
insurance organization offering predominantly personal automobile and
homeowners insurance through a network of independent agents and brokers in
many states. For more information, visit our website at
http://www.mercuryinsurance.com. The Company will be hosting a conference call and
webcast at 10:00 A.M. Pacific Time (1:00 P.M. Eastern Time) today in which
management will discuss results and address questions. The teleconference and
webcast can be accessed by calling 1 (877) 807-1888 or by visiting
http://www.mercuryinsurance.com. A replay of the call will be available beginning at
1:30 P.M. Pacific Time and running through February 15, 2005. The replay
telephone numbers are (800) 642-1687 (USA) or (706) 645-9291 (International).
The conference ID# is 3419001. The replay will also be available on the
Company's website shortly following the call.
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. The statements contained in
this press release 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, and in general economic conditions; the accuracy and
adequacy of the Company's pricing methodologies; market risks associated with
the Company's investment portfolio; 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; inflation and changes in economic
conditions; the Company's ability to obtain and the timing of regulatory
approval for requested rate changes; legislation adverse to the automobile
insurance industry or business generally that may be enacted in California or
other states; the presence of competitors with greater financial resources and
the impact of competitive pricing; changes in driving patterns and loss
trends; acts of war and terrorist activities; court decisions and trends in
litigation and health care and auto repair costs and marketing efforts; and
various legal, regulatory and litigation risks. The Company undertakes no
obligation to publicly update or revise any forward-looking statements,
whether as the result of new information, future events or otherwise. For a
more detailed discussion of some of the foregoing risks and uncertainties, see
the Company's filings with the Securities and Exchange Commission.
Mercury General Corporation
Information Regarding Non-GAAP Measures
The Company has presented information within this document containing
operating measures which in management's opinion provide investors useful
industry specific information to evaluate and perform meaningful comparisons
of the Company's performance but that may not be presented in accordance with
Generally Accepted Accounting Principles ("GAAP"). These measures are not
intended to replace, and should be read in conjunction with, the Company's
GAAP financial results. The Company has reconciled these measures with the
most directly comparable GAAP measure in the supplemental schedule entitled,
"Summary of Operating Results."
Net Premiums Written represents the premiums charged on policies issued
during a fiscal period. Net Premiums Earned, the most directly comparable
GAAP measure, represents the portion of premiums written that is recognized as
income in the financial statements for the periods presented and earned on a
pro-rata basis over the term of the policies. Net Premiums Written is meant
as supplemental information and is not intended to replace Net Premiums
Earned. It should be read in conjunction with the GAAP financial results.
Paid Losses and Loss Adjustment Expenses is the portion of Incurred Losses
and Loss Adjustment Expenses, the most directly comparable GAAP measure,
excluding the effects of changes in the loss reserve accounts. Paid Losses
and Loss Adjustment Expenses is meant as supplemental information and is not
intended to replace Incurred Losses and Loss Adjustment Expenses. It should
be read in conjunction with the GAAP financial results.
Mercury General Corporation and Subsidiaries
Summary of Operating Results
(000's) except per-share amounts and ratios
(unaudited)
Quarter Ended Twelve Months Ended
December 31, December 31,
2004 2003 2004 2003
Net premiums written $674,239 $591,401 $2,646,704 $2,268,778
Net premiums earned 668,102 572,671 2,528,636 2,145,047
Paid losses and loss
adjustment expenses 394,919 347,453 1,481,803 1,330,784
Incurred losses and
loss adjustment expenses 413,573 385,330 1,582,254 1,452,051
Net investment income 29,331 26,348 109,681 104,520
Net realized investment
gains, net of tax 4,168 3,817 16,292 7,285
Net income $74,129 $49,226 $286,208 $184,321
Basic average shares
outstanding 54,506 54,418 54,471 54,402
Diluted average shares
outstanding 54,683 54,586 54,633 54,547
Basic Per Share Data
Net income $1.36 $0.90 $5.25 $3.39
Net realized investment
gains, net of tax $0.08 $0.07 $0.30 $0.13
Diluted Per Share Data
Net income $1.36 $0.90 $5.24 $3.38
Net realized investment
gains, net of tax $0.08 $0.07 $0.30 $0.13
Operating Ratios
-- GAAP (a) Basis
Loss ratio 61.9% 67.3% 62.6% 67.7%
Expense ratio 26.7% 26.8% 26.6% 26.3%
Combined ratio 88.6% 94.1% 89.2% 94.0%
Reconciliations of Operating
Measures to Comparable
GAAP (a) Measures
Net premiums written $674,239 $591,401 $2,646,704 $2,268,778
Increase in unearned
premiums (6,137) (18,730) (118,068) (123,731)
Net premiums earned $668,102 $572,671 $2,528,636 $2,145,047
Paid losses and loss
adjustment expenses $394,919 $347,453 $1,481,803 $1,330,784
Increase in net losses
and loss adjustment
expense reserves 18,654 37,877 100,451 121,267
Incurred losses and loss
adjustment expenses $413,573 $385,330 $1,582,254 $1,452,051
(a) Generally Accepted Accounting Principles
Mercury General Corporation and Subsidiaries
Other Supplemental Information
(000's) except ratios
(unaudited)
Quarter ending Twelve Months Ending
December 31, December 31,
2004 2003 2004 2003
Total California
Operations (1)
Net Premiums Written $494,975 $481,744 $2,006,351 $1,886,217
Net Premiums Earned 501,745 477,291 1,981,463 1,804,960
Loss Ratio 61.7% 68.8% 61.0% 68.9%
Expense Ratio 24.9% 25.5% 25.6% 25.4%
Combined Ratio 86.6% 94.3% 86.6% 94.3%
California Automobile
lines
Net Premiums Written $450,002 $442,636 $1,827,527 $1,738,462
Net Premiums Earned 458,126 440,791 1,818,122 1,674,801
Loss Ratio 64.2% 67.9% 62.9% 69.0%
Expense Ratio 25.1% 25.7% 25.7% 25.3%
Combined Ratio 89.3% 93.6% 88.6% 94.3%
California Homeowners
line
Net Premiums Written $36,558 $32,407 $147,763 $122,897
Net Premiums Earned 35,922 30,328 135,370 108,141
Loss Ratio 33.8% 84.0% 36.3% 67.9%
Expense Ratio 24.5% 24.4% 24.8% 25.1%
Combined Ratio (a) 58.3% 108.4% 61.2% 93.0%
Non-California
Operations (2)
Net Premiums Written $179,264 $109,657 $640,353 $382,561
Net Premiums Earned 166,357 95,380 547,173 340,087
Loss Ratio 62.5% 59.7% 68.4% 61.5%
Expense Ratio 32.3% 33.5% 30.4% 30.9%
Combined Ratio 94.8% 93.2% 98.8% 92.4%
At December 31,
Policies-in-force (000's) 2004 2003
California Personal Auto 1,060 1,026
California Commercial Auto 21 20
Non-California Personal Auto 322 184
California Homeowners 215 187
Florida Homeowners 16 10
All ratios are calculated on GAAP basis.
(a) Some numbers may not sum due to rounding
(1) Total California operations includes homeowners, auto, commercial
property and other immaterial California business lines
(2) Includes all states except California
Mercury General Corporation and Subsidiaries
Condensed Balance Sheet and Other Information
(000's) except per-share amounts
December 31, 2004 December 31, 2003
(unaudited)
Investments - available for sale
Fixed maturities at market
(amortized cost $2,164,955
in 2004 and $1,856,083 in 2003) $2,245,311 $1,945,309
Equity securities at market
(cost $210,553 in 2004 and
$223,113 in 2003) 254,362 264,393
Short-term cash investments,
at cost, which approximates market 421,369 329,812
Total investments 2,921,042 2,539,514
Net receivables 367,662 299,094
Deferred policy acquisition costs 174,840 146,951
Other assets 146,199 134,207
Total assets $3,609,743 $3,119,766
Loss and loss adjustment expenses $900,744 $797,927
Unearned premiums 799,679 681,745
Other liabilities 325,029 259,877
Notes payable 124,743 124,714
Shareholders' equity 1,459,548 1,255,503
Total liabilities and
shareholders' equity $3,609,743 $3,119,766
Common stock - shares outstanding 54,515 54,424
Book value per share $26.77 $23.07
Statutory surplus $1.36 billion $1.17 billion
Portfolio duration 3.2 years 3.8 years
SOURCE Mercury General Corporation
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Related links:
http://www.mercuryinsurance.com
CONTACT:
Theodore Stalick, VP/CFO of Mercury General
Corporation, +1-323-937-1060
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