LOS ANGELES, May 7 /PRNewswire-FirstCall/ -- Mercury General
Corporation (NYSE: MCY) reported today net income of $60.5 million ($1.10
per share-diluted) in the first quarter 2007 compared with $58.6 million
($1.07 per share-diluted) for the same period in 2006. Included in net
income are net realized investment losses, net of tax, of $0.7 million
($0.01 per share-diluted) in the first quarter of 2007 compared with net
realized investment gains, net of tax, of $4.2 million ($0.08 per
share-diluted) for the same period in 2006.
Company-wide net premiums written were $785.9 million in the first
quarter 2007, a 1.5% increase over first quarter 2006 net premiums written
of $774.0 million. California net premiums written were $601.0 million in
the first quarter of 2007, an increase of 6.2% over the same period in
2006. Non-California net premiums written were $184.9 million in the first
quarter of 2007, an 11.2% decrease over the same period in 2006.
The Company's combined ratio (GAAP basis) was 94.5% in the first
quarter of 2007 compared with 91.8% for the same period in 2006. Loss
development on prior accident years' loss reserves, which came primarily
from the Company's California operations, was approximately $13 million
adverse and $10 million positive for the quarters ended March 31, 2007 and
2006, respectively.
Net investment income of $42.1 million (after tax $35.7 million) in the
first quarter of 2007 increased by 7.0% over the same period in 2006. The
after-tax yield on investment income was 4.2% on average assets of $3.4
billion (fixed maturities and equities at cost) for the quarter. This
compares with an after-tax yield on investment income of 4.1% on average
investments of $3.2 billion (fixed maturities and equities at cost) for the
same period in 2006.
As previously reported, included in net income in the first quarter
2006 is an income tax charge, net of federal tax benefit, of approximately
$15 million, or $0.27 per share (diluted), relating to Notices of Proposed
Assessments upheld by the California State Board of Equalization ("SBE")
for tax years 1993 through 1996 in which the California Franchise Tax Board
disallowed a portion of the Company's expenses related to management
services provided to its insurance company subsidiaries. The Company is
challenging the SBE decision in Superior Court.
The Board of Directors declared a second quarter dividend of $0.52 per
share, representing an 8.3% increase over the quarterly dividend amount
paid in 2006. The dividend is to be paid on June 28, 2007 to shareholders
of record on June 15, 2007. The Company's book value per share at March 31,
2007 was $32.30.
Mercury General Corporation and its subsidiaries are a multiple line
insurance organization offering predominantly personal automobile and
homeowners insurance through a network of independent producers in many
states. For more information, visit the Company's website at
http://www.mercuryinsurance.com. The Company will be hosting a conference call and
webcast today at 10:00 A.M. Pacific time where management will discuss
results and address questions. The teleconference and webcast can be
accessed by calling (877) 807-1888 (USA), (706) 679-3827 (International) 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 May 14,
2007. The replay telephone numbers are (800) 642-1687 (USA) or (706)
645-9291 (International). The conference ID# is 6300927. 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, inflation and in
general economic conditions; the accuracy and adequacy of the Company's
pricing methodologies; adverse weather conditions or natural disasters in
the markets served by the Company; 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; 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 Company's
success in expanding its business in states outside of California; the
Company's ability to successfully complete its initiative to standardize
its policies and procedures nationwide in all of its functional areas; 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 with
useful, industry specific information to help them 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 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 March 31,
2007 2006
Net premiums written $785,883 $774,020
Net premiums earned 755,752 736,680
Paid losses and loss adjustment expenses 519,946 479,340
Incurred losses and loss adjustment expenses 509,759 475,180
Net investment income 42,145 39,403
Net realized investment (losses) gains,
net of tax (677) 4,195
Net income $60,453 $58,646
Basic average shares outstanding 54,674 54,623
Diluted average shares outstanding 54,821 54,745
Basic Per Share Data
Net income $1.11 $1.07
Net realized investment (losses) gains,
net of tax $(0.01) $0.08
Diluted Per Share Data
Net income $1.10 $1.07
Net realized investment (losses) gains,
net of tax $(0.01) $0.08
Operating Ratios -- GAAP (a) Basis
Loss ratio 67.5% 64.5%
Expense ratio 27.0% 27.3%
Combined ratio 94.5% 91.8%
Reconciliations of Operating Measures to
Comparable GAAP (a) Measures
Net premiums written $785,883 $774,020
Increase in unearned premiums (30,131) (37,340)
Net premiums earned $755,752 $736,680
Paid losses and loss adjustment expenses $519,946 $479,340
Decrease in net loss and loss adjustment
expense reserves (10,187) (4,160)
Incurred losses and loss adjustment
expenses $509,759 $475,180
(a) Generally Accepted Accounting Principles
Mercury General Corporation and Subsidiaries
Other Supplemental Information
(000's except ratios)
(unaudited)
Quarter Ended March 31,
2007 2006
California Operations (1)
Net Premiums Written $600,982 $565,908
Net Premiums Earned 573,517 539,257
Loss Ratio 65.2% 63.7%
Expense Ratio 26.0% 26.5%
Combined Ratio 91.2% 90.2%
Non-California Operations (2)
Net Premiums Written $184,901 $208,112
Net Premiums Earned 182,235 197,423
Loss Ratio 74.4% 66.7%
Expense Ratio 30.4% 29.4%
Combined Ratio 104.9% 96.1%
At March 31,
Policies-in-force (000's) 2007 2006
California Personal Auto 1,152 1,124
California Commercial Auto 20 21
Non-California Personal Auto 326 372
California Homeowners 264 247
Florida Homeowners 13 15
Notes:
All ratios are calculated on GAAP basis.
(1) Includes homeowners, auto, commercial property and other immaterial
California business lines
(2) Includes all states except California
Mercury General Corporation and Subsidiaries
Condensed Balance Sheets and Other Information
(000's except per-share amounts)
(unaudited)
March 31, 2007 December 31, 2006
Investments - available for sale
Fixed maturities at market
(amortized cost $2,888,100
in 2007 and $2,851,715 in 2006)
(includes hybrid financial
instruments: 2007 -- $12,745) $2,929,364 $2,898,987
Equity securities at market
(cost $282,448 in 2007 and
$258,310 in 2006) 362,229 318,449
Short-term investments, at cost,
which approximates market 244,438 282,302
Total investments 3,536,031 3,499,738
Net receivables 393,863 372,777
Deferred policy acquisition costs 216,191 209,783
Other assets 226,657 218,764
Total assets $4,372,742 $4,301,062
Losses and loss adjustment expenses $1,078,304 $1,088,822
Unearned premiums 980,428 950,344
Other liabilities 407,092 396,212
Notes payable 140,808 141,554
Shareholders' equity 1,766,110 1,724,130
Total liabilities and shareholders'
equity $4,372,742 $4,301,062
Common stock - shares outstanding 54,681 54,670
Book value per share $32.30 $31.54
Statutory surplus $1.6 billion $1.6 billion
Portfolio duration 4.5 years 4.0 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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