Appoints Martha Marcon to the Board of Directors
LOS ANGELES, Aug. 4 /PRNewswire-FirstCall/ -- Mercury General
Corporation (NYSE: MCY) reported today for the second quarter of 2008:
Consolidated Highlights
Three Months Ended
June 30, Change
2008 2007 $ %
(000's except per-share amounts and ratios)
Net premiums written (1) $684,177 $737,394 $(53,217) (7.2)
Net income 70,726 69,509 1,217 1.8
Net income per diluted share 1.29 1.27 0.02 1.6
Operating income (1) 47,004 63,016 (16,012) (25.4)
Operating income per diluted share (1) 0.86 1.15 (0.29) (25.2)
(Adverse) positive development on
prior periods' loss reserves (2) (9,000) (1,000) (8,000) --
Combined ratio 97.0% 94.0% -- 3.0 pts
Combined ratio-accident period
basis (1) (3) 95.8% 93.9% -- 1.9 pts
Six Months Ended
June 30, Change
2008 2007 $ %
(000's except per-share amounts and ratios)
Net premiums written (1) $1,413,443 $1,523,277 $(109,834) (7.2)
Net income 66,765 129,962 (63,197) (48.6)
Net income per diluted share 1.22 2.37 (1.15) (48.6)
Operating income (1) 102,932 124,146 (21,214) (17.1)
Operating income per diluted
share (1) 1.88 2.26 (0.38) (17.0)
(Adverse) positive development on
prior periods' loss reserves (2) (17,000) (13,000) (4,000) --
Combined ratio 96.2% 94.3% -- 1.9 pts
Combined ratio-accident period
basis (1) (3) 95.1% 93.4% -- 1.7 pts
(1) These measures are not based on U.S. generally accepted accounting
principles and are defined and reconciled to the most directly
comparable GAAP measures in "Information Regarding Non-GAAP Measures."
(2) The amounts are rounded to the nearest million.
(3) Ratio for three months excludes development on March 31, 2008 and prior
loss reserves; ratio for six months excludes development on 2007 and
prior loss reserves.
Net income in the second quarter 2008 was $70.7 million ($1.29 per
share- diluted) compared with net income of $69.5 million ($1.27 per
share-diluted) for the same period in 2007. For the first six months of
2008, net income was $66.8 million ($1.22 per share-diluted) compared to
net income of $130.0 million ($2.37 per share-diluted) for the same period
in 2007. Included in net income are net realized investment gains, net of
tax, of $23.7 million ($0.43 per share-diluted) in the second quarter of
2008 compared with net realized investment gains, net of tax, of $6.5
million ($0.12 per share-diluted) for the same period in 2007, and net
realized investment losses, net of tax, of $36.2 million ($0.66 per
share-diluted) for the first six months of 2008 compared to net realized
investment gains, net of tax, of $5.8 million ($0.11 per share- diluted)
for the same period in 2007. Operating income was $47.0 million ($0.86 per
share-diluted) for the second quarter of 2008, down 25.4% from the prior
year quarter, and $102.9 million ($1.88 per share-diluted) for the first
six months of 2008, down 17.1% from the same period in 2007.
Net realized investment gains, net of tax, of $23.7 million in the
second quarter of 2008 and net realized investment losses, net of tax, of
$36.2 million for the first six months of 2008 include gains, net of tax,
of $14.7 million and losses, net of tax, of $46.0 million, respectively,
due to adoption of SFAS No. 159, "The Fair Value Option for Financial
Assets and Financial Liabilities," for fixed maturity and equity securities
on January 1, 2008. As a result of this adoption, changes in unrealized
gains and losses for such securities that were previously recorded as
changes to accumulated other comprehensive income on the balance sheet are
now recorded as realized gains and losses on the income statement. The
Company sustained a decline in municipal bond prices throughout the six
months of 2008 resulting from liquidity problems in the overall municipal
bond markets and credit downgrades or negative outlooks for most municipal
bond insurers. However, the price declines on the equity holdings of the
Company experienced during the first quarter of 2008 were mostly offset by
the price appreciation on such holdings during the second quarter of 2008.
Company-wide net premiums written were $684.2 million in the second
quarter 2008, a 7.2% decrease over the second quarter 2007 net premiums
written of $737.4 million, and were approximately $1.4 billion for the
first six months of 2008, a 7.2% decrease over the same period in 2007.
California net premiums written were $535.3 million in the second quarter
of 2008, a decrease of 5.7% over the same period in 2007, and were
approximately $1.1 billion for the first six months of 2008, a 5.0%
decrease over the same period in 2007. Non- California net premiums written
were $148.9 million in the second quarter of 2008, a 12.2% decrease over
the same period in 2007, and were $302.6 million for the first six months
of 2008, a decrease of 14.6% over the same period in 2007.
Net investment income of $39.0 million (after tax $34.4 million) in the
second quarter of 2008 decreased by 4.4% over the same period in 2007. The
after-tax yield on investment income was 4.0% on average assets of $3.5
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 $3.4 billion (fixed maturities and equities at cost) for the
same period in 2007. Net investment income for the first six months of 2008
was $78.3 million (after tax $68.8 million), a decrease of 5.6% over the
same period in 2007. The after-tax yield on investment income was 4.0% on
average assets of $3.5 billion for the first six months of 2008, compared
with an after-tax yield on investment income of 4.1% on average investments
of $3.4 billion (fixed maturities and equities at cost) for the same period
in 2007.
On July 1, 2008, the California Superior Court ruled in favor of
Mercury General Corporation in a case filed against the California
Franchise Tax Board ("FTB") entitling the Company to a tax refund of
approximately $22 million plus interest. After accounting for federal
taxes, the Company expects to record a tax benefit of approximately $15
million in the third quarter of 2008. However, the ruling may be appealed
by the FTB.
On August 1, 2008, the Board of Directors appointed Martha Marcon, a
retired audit partner of KPMG LLP, to the Board of Directors. Ms. Marcon
retired in 2006 with more than 30 years' experience auditing public and
private companies. Her extensive experience working with companies in the
insurance industry will bring a wealth of industry knowledge to the Board
of Directors.
The Board of Directors declared a quarterly dividend of $0.58 per
share, representing an 11.5% increase over the quarterly dividend amount
paid in 2007. The dividend is to be paid on September 30, 2008 to
shareholders of record on September 15, 2008. The Company's book value per
share at June 30, 2008 was $34.09.
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 August
11, 2008. The replay telephone numbers are (800) 642-1687 (USA) or (706)
645-9291 (International). The conference ID# is 55669578. 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.
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 U.S. generally accepted accounting principles
("GAAP"). These measures are not intended to replace, and should be read in
conjunction with, the GAAP financial results.
Operating income is net income excluding realized investment gains and
losses, net of tax, and adjustments for other significant non-recurring,
infrequent or unusual items. Net income is the GAAP measure that is most
directly comparable to operating income. Operating income is meant as
supplemental information and is not intended to replace net income. It
should be read in conjunction with the GAAP financial results. The Company
has reconciled operating income with the most directly comparable GAAP
measure in the table below.
Three Months Ended
June 30,
Per diluted
Total share
2008 2007 2008 2007
(000's except per-share amounts)
Operating income $47,004 $63,016 $0.86 $1.15
Net realized investment gains
(losses), net of tax 23,722 6,493 0.43 0.12
Net income 70,726 69,509 1.29 1.27
Six Months Ended
June 30,
Per diluted
Total share
2008 2007 2008 2007
(000's except per-share amounts)
Operating income $102,932 $124,146 $1.88 $2.26
Net realized investment gains
(losses), net of tax (36,167) 5,816 (0.66) 0.11
Net income 66,765 129,962 1.22 2.37
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. The Company has reconciled net premiums written with the most
directly comparable GAAP measure in the supplemental schedule entitled,
"Summary of Operating 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. The Company has reconciled paid losses and loss
adjustment expenses with the most directly comparable GAAP measure in the
supplemental schedule entitled, "Summary of Operating Results."
Combined ratio-accident period basis is a non-GAAP ratio, which is
computed as the difference between two GAAP operating ratios: the combined
ratio and the effect of prior accident periods' loss development. The most
directly comparable GAAP measure is the combined ratio. The Company
believes that this ratio is useful to investors and it is used by
management to reveal the trends in the Company's business that may be
obscured by development on prior accident periods' loss reserves. Combined
ratio-accident period basis is meant as supplemental information and is not
intended to replace combined ratio. It should be read in conjunction with
the GAAP financial results. The Company has reconciled combined
ratio-accident period basis with the most directly comparable GAAP measure
in the table below.
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Combined ratio-accident period basis 95.8 93.9 95.1 93.4
Effect of prior periods' loss
development 1.2 0.1 1.1 0.9
Combined ratio 97.0 94.0 96.2 94.3
Mercury General Corporation and Subsidiaries
Summary of Operating Results
(000's except per-share amounts and ratios)
(unaudited)
Quarter Ended June 30, Six Months Ended June 30,
2008 2007 2008 2007
Net premiums written $684,177 $737,394 $1,413,443 $1,523,277
Net premiums earned 711,204 754,076 1,432,120 1,509,828
Paid losses and loss
adjustment expenses 511,322 491,421 1,056,254 1,011,367
Incurred losses and loss
adjustment expenses 489,545 504,378 973,018 1,014,137
Net investment income 38,995 40,795 78,294 82,940
Net realized investment gains
(losses), net of tax 23,722 6,493 (36,167) 5,816
Net income $70,726 $69,509 $66,765 $129,962
Basic average shares
outstanding 54,734 54,697 54,732 54,685
Diluted average shares
outstanding 54,997 54,848 54,895 54,829
Basic Per Share Data
Net income $1.29 $1.27 $1.22 $2.38
Net realized investment gains
(losses), net of tax $0.43 $0.12 $(0.66) $0.11
Diluted Per Share Data
Net income $1.29 $1.27 $1.22 $2.37
Net realized investment gains
(losses), net of tax $0.43 $0.12 $(0.66) $0.11
Operating Ratios-GAAP (a)
Basis
Loss ratio 68.8% 66.9% 67.9% 67.2%
Expense ratio 28.2% 27.1% 28.3% 27.1%
Combined ratio 97.0% 94.0% 96.2% 94.3%
Reconciliations of Operating
Measures to Comparable GAAP
(a) Measures
Net premiums written $684,177 $737,394 $1,413,443 $1,523,277
Decrease (increase) in
unearned premiums 27,027 16,682 18,677 (13,449)
Net premiums earned $711,204 $754,076 $1,432,120 $1,509,828
Paid losses and loss
adjustment expenses $511,322 $491,421 $1,056,254 $1,011,367
(Decrease) increase in net
loss and loss adjustment
expense reserves (21,777) 12,957 (83,236) 2,770
Incurred losses and loss
adjustment expenses $489,545 $504,378 $973,018 $1,014,137
(a) U.S. generally accepted accounting principles
Mercury General Corporation and Subsidiaries
Other Supplemental Information
(000's except ratios)
(unaudited)
Quarter Ended June 30, Six Months Ended June 30,
2008 2007 2008 2007
California Operations (1)
Net Premiums Written $535,299 $567,904 $1,110,858 $1,168,886
Net Premiums Earned 558,363 577,827 1,122,957 1,151,343
Loss Ratio 64.8% 64.2% 66.1% 64.7%
Expense Ratio 27.0% 26.0% 26.9% 26.0%
Combined Ratio 91.8% 90.2% 93.0% 90.7%
Loss Ratio-accident period
basis (3) 65.0% 63.3% 64.7% 63.3%
Non-California Operations (2)
Net Premiums Written $148,878 $169,490 $302,585 $354,391
Net Premiums Earned 152,841 176,249 309,163 358,485
Loss Ratio 83.7% 75.7% 74.7% 75.1%
Expense Ratio 32.6% 30.8% 33.4% 30.6%
Combined Ratio 116.3% 106.5% 108.1% 105.7%
Loss Ratio-accident period
basis (3) 77.1% 77.4% 74.3% 76.2%
At June 30,
Policies-in-Force (000's) 2008 2007
California Personal Auto 1,093 1,153
California Commercial Auto 18 20
Non-California Personal Auto 274 312
California Homeowners 269 266
Florida Homeowners 12 13
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
(3) Ratio for three months excludes development on March 31, 2008 and prior
loss reserves; ratio for six months excludes development on 2007 and
prior loss reserves.
Mercury General Corporation and Subsidiaries
Condensed Balance Sheets and Other Information
(000's except per-share amounts)
(unaudited)
June 30, 2008 December 31, 2007
Investments:
Fixed maturities available for sale,
at fair value (amortized cost $2,860,455) $- $2,887,760
Fixed maturities trading, at fair value
(amortized cost $2,814,579) 2,772,028 -
Equity securities available for sale,
at fair value (cost $317,869) - 413,123
Equity securities trading, at fair value
(cost $397,892; $13,126) 493,143 15,114
Short-term investments, at fair value
(amortized cost $219,197; $272,678) 218,884 272,678
Total investments 3,484,055 3,588,675
Net receivables 353,588 367,686
Deferred policy acquisition costs 205,954 209,805
Other assets 267,187 248,330
Total assets $4,310,784 $4,414,496
Losses and loss adjustment expenses $1,020,932 $1,103,915
Unearned premiums 919,622 938,370
Notes payable 154,067 138,562
Other liabilities 349,835 371,651
Shareholders' equity 1,866,328 1,861,998
Total liabilities and shareholders'
equity $4,310,784 $4,414,496
Common stock-shares outstanding 54,744 54,730
Book value per share $34.09 $34.02
Statutory surplus $1.8 billion $1.7 billion
Portfolio duration 5.4 years 4.4 years
SOURCE Mercury General Corporation
 back to top
Related links:
http://www.mercuryinsurance.com/
CONTACT:
Theodore Stalick, VP/CFO of Mercury General
Corporation, +1-323-937-1060
|
