LOS ANGELES, Aug. 6 /PRNewswire-FirstCall/ -- Mercury General
Corporation (NYSE: MCY) reported today net income of $69.5 million ($1.27
per share-diluted) in the second quarter 2007 compared with $37.8 million
($0.69 per share-diluted) for the same period in 2006. For the first six
months of 2007, net income was $130.0 million ($2.37 per share-diluted)
compared to net income of $96.5 million ($1.76 per share-diluted) for the
same period in 2006. Included in net income are net realized investment
gains, net of tax, of $6.5 million ($0.12 per share-diluted) in the second
quarter of 2007 compared with net realized investment gains, net of tax, of
$2.8 million ($0.05 per share-diluted) for the same period in 2006, and net
realized investment gains, net of tax, of $5.8 million ($0.11 per
share-diluted) for the first six months of 2007 compared to net realized
investment gains, net of tax, of $6.9 million ($0.13 per share-diluted) for
the same period in 2006.
Company-wide net premiums written were $737.4 million in the second
quarter 2007, a 2.2% decrease over second quarter 2006 net premiums written
of $753.8 million, and were approximately $1.5 billion for the first six
months of 2007, a 0.3% decrease over the same period in 2006. California
net premiums written were $567.9 million in the second quarter of 2007, an
increase of 2.9% over the same period in 2006, and were approximately $1.2
billion for the first six months of 2007, a 4.6% increase over the same
period in 2006. Non-California net premiums written were $169.5 million in
the second quarter of 2007, a 16.0% decrease over the same period in 2006,
and were $354.4 million for the first six months of 2007, a decrease of
13.5% over the same period in 2006.
During the second quarter of 2007, the Company accrued $5.0 million as
a reduction to California premiums in anticipation of issuing coupons that
are redeemable towards new and renewal premiums as part of the settlement
of a lawsuit. The impact of this accrual, net of tax, is a reduction to net
income of $3.3 million for both the second quarter and the first six months
of 2007. For the second quarter of 2007, the accrual added 0.7 points to
the company-wide decrease in premiums written and reduced the growth in
California premiums written by 0.9 points.
The Company's combined ratio (GAAP basis) was 94.0% in the second
quarter and 94.3% for the first six months of 2007 compared with 98.6% and
95.3% for the same periods in 2006. Loss development on prior accident
years' loss reserves was approximately $13 million adverse for the six
months ended June 30, 2007, compared with approximately $15 million adverse
for the same period in 2006. Adverse loss development on prior accident
years' loss reserves for the six months of 2007 came primarily from the
Company's California operations. As reported previously, for the states
outside of California, the Company experienced adverse development for the
six months ended June 30, 2006 of approximately $30 million on prior
accident years' loss reserves, largely due to additional reserves
established for large individual losses in Florida and additional reserves
established for personal injury protection and bodily injury losses in New
Jersey. The Company experienced positive development on prior accident
years' loss reserves of approximately $15 million for the six months ended
June 30, 2006 on its California business.
Net investment income of $40.8 million (after tax $35.0 million) in the
second quarter of 2007 increased by 12.6% over the same period in 2006. The
after-tax yield on investment income was 4.1% 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 3.7% on average
investments of $3.3 billion (fixed maturities and equities at cost) for the
same period in 2006.
The Board of Directors declared a third 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 September 27, 2007 to
shareholders of record on September 14, 2007. The Company's book value per
share at June 30, 2007 was $32.71.
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
13, 2007. The replay telephone numbers are (800) 642- 1687 (USA) or (706)
645-9291 (International). The conference ID# is 7040282. 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 Six Months Ended
June 30, June 30,
2007 2006 2007 2006
Net premiums written $737,394 $753,826 $1,523,277 $1,527,846
Net premiums earned 754,076 753,350 1,509,828 1,490,030
Paid losses and loss
adjustment expenses 491,421 486,508 1,011,367 965,848
Incurred losses and loss
adjustment expenses 504,378 534,316 1,014,137 1,009,496
Net investment income 40,795 36,242 82,940 75,645
Net realized investment
gains, net of tax 6,493 2,751 5,816 6,946
Net income $69,509 $37,812 $129,962 $96,458
Basic average shares
outstanding 54,697 54,648 54,685 54,636
Diluted average shares
outstanding 54,848 54,761 54,829 54,765
Basic Per Share Data
Net income $1.27 $0.69 $2.38 $1.77
Net realized investment
gains, net of tax $0.12 $0.05 $0.11 $0.13
Diluted Per Share Data
Net income $1.27 $0.69 $2.37 $1.76
Net realized investment
gains, net of tax $0.12 $0.05 $0.11 $0.13
Operating Ratios-GAAP (a)
Basis
Loss ratio 66.9% 70.9% 67.2% 67.8%
Expense ratio 27.1% 27.7% 27.1% 27.5%
Combined ratio 94.0% 98.6% 94.3% 95.3%
Reconciliations of Operating
Measures to Comparable
GAAP (a) Measures
Net premiums written $737,394 $753,826 $1,523,277 $1,527,846
Decrease (Increase) in
unearned premiums 16,682 (476) (13,449) (37,816)
Net premiums earned $754,076 $753,350 $1,509,828 $1,490,030
Paid losses and loss
adjustment expenses $491,421 $486,508 $1,011,367 $965,848
Increase in net loss and
loss adjustment expense
reserves 12,957 47,808 2,770 43,648
Incurred losses and loss
adjustment expenses $504,378 $534,316 $1,014,137 $1,009,496
(a) 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,
2007 2006 2007 2006
California Operations (1)
Net premiums written $567,904 $552,144 $1,168,886 $1,118,051
Net premiums earned 577,827 552,209 1,151,343 1,091,467
Loss ratio 64.2% 63.6% 64.7% 63.6%
Expense ratio 26.0% 26.9% 26.0% 26.7%
Combined ratio 90.2% 90.5% 90.7% 90.3%
Non-California
Operations (2)
Net premiums written $169,490 $201,682 $354,391 $409,795
Net premiums earned 176,249 201,141 358,485 398,563
Loss ratio 75.7% 91.1% 75.1% 79.0%
Expense ratio 30.8% 29.9% 30.6% 29.7%
Combined ratio 106.5% 121.0% 105.7% 108.7%
At June 30,
Policies-in-force (000's) 2007 2006
California personal auto 1,153 1,138
California commercial auto 20 21
Non-California personal auto 312 364
California homeowners 266 253
Florida homeowners 13 14
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)
June 30, December 31,
2007 2006
Fixed maturities available for
sale (amortized cost $2,882,306 in
2007 and $2,851,715 in 2006)
(includes hybrid financial instruments:
$33,631 in 2007) $2,883,376 $2,898,987
Equity securities available for sale
(cost $268,070 in 2007 and $258,310 in 2006) 360,038 318,449
Equity securities trading (cost $9,264 in 2007) 9,438 -
Short-term investments, at cost, which
approximates market 283,573 282,302
Total investments 3,536,425 3,499,738
Net receivables 380,150 372,777
Deferred policy acquisition costs 213,902 209,783
Other assets 240,446 218,764
Total assets $4,370,923 $4,301,062
Losses and loss adjustment expenses $1,090,682 $1,088,822
Unearned premiums 963,775 950,344
Other liabilities 398,934 396,212
Notes payable 127,913 141,554
Shareholders' equity 1,789,619 1,724,130
Total liabilities and
shareholders' equity $4,370,923 $4,301,062
Common stock-shares outstanding 54,717 54,670
Book value per share $32.71 $31.54
Statutory surplus $1.7 billion $1.6 billion
Portfolio duration 5.0 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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