LOS ANGELES, Aug. 7 /PRNewswire-FirstCall/ -- Mercury General
Corporation (NYSE: MCY) reported today net income of $37.8 million ($0.69
per share-diluted) in the second quarter 2006 compared with $73.6 million
($1.35 per share-diluted) for the same period in 2005. For the first six
months of 2006, net income was $96.5 million ($1.76 per share-diluted)
compared to net income of $134.0 million ($2.45 per share-diluted) for the
same period in 2005. Included in net income are net realized investment
gains, net of tax, of $2.8 million ($0.05 per share-diluted) in the second
quarter of 2006 compared with net realized investment gains, net of tax, of
$2.3 million ($0.04 per share-diluted) for the same period in 2005, and net
realized investment gains, net of tax, of $6.9 million ($0.13 per
share-diluted) for the first six months of 2006 compared to net realized
investment gains, net of tax, of $5.0 million ($0.09 per share-diluted) for
the same period in 2005.
Company-wide net premiums written were $753.8 million in the second
quarter 2006, a 3.3% increase over second quarter 2005 net premiums written
of $729.9 million, and were approximately $1.5 billion for the first six
months of 2006, a 4.7% increase over the same period in 2005. California
net premiums written were $552.1 million in the second quarter of 2006, an
increase of 5.0% over the same period in 2005, and were approximately $1.1
billion for the first six months of 2006, a 6.3% increase over the same
period in 2005. Non-California net premiums written were $201.7 million in
the second quarter of 2006, a 1.1% decrease over the same period in 2005,
and were $409.8 million for the first six months of 2006, an increase of
0.5% over the same period in 2005.
The Company's combined ratio (GAAP basis) was 98.6% in the second
quarter and 95.3% for the first six months of 2006 compared with 90.1% and
91.3% for the same periods in 2005. 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. The loss development primarily relates 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. As a result of these developments, the Company also increased the
implied severity for the 2006 accident year for Florida and New Jersey
business. 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.
The Company continues to focus on an initiative embarked in 2005 to
standardize its policies and procedures nationwide in all of its functional
areas. The Company has made significant changes to its Florida and New
Jersey operations and believes these and future changes will have a
positive impact on its operations.
Net investment income of $36.2 million (after tax $30.0 million) in the
second quarter of 2006 increased by 18.0% over the same period in 2005. The
after-tax yield on investment income was 3.7% on average assets of $3.3
billion (fixed maturities and equities at cost) for the quarter. This
compares with an after tax yield on investment income of 3.6% on average
investments of $3.0 billion (fixed maturities and equities at cost) for the
same period in 2005.
The Board of Directors declared a second quarter dividend of $0.48 per
share, representing an 11.6% increase over the quarterly dividend amount
paid in 2005. The dividend is to be paid on September 28, 2006 to
shareholders of record on September 15, 2006. The Company's book value per
share at June 30, 2006 was $29.87.
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
15, 2006. The replay telephone numbers are (800) 642-1687 (USA) or (706)
645-9291 (International). The conference ID# is 3218288. 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
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 June 30, Six Months Ended June 30,
2006 2005 2006 2005
Net premiums written $753,826 $729,875 $1,527,846 $1,459,705
Net premiums earned 753,350 707,261 1,490,030 1,391,975
Paid losses and loss
adjustment expenses 486,508 422,055 965,848 846,727
Incurred losses and
loss adjustment
expenses 534,316 442,764 1,009,496 891,010
Net investment income 36,242 30,701 75,645 59,486
Net realized investment
gains, net of tax 2,751 2,304 6,946 5,045
Net income $37,812 $73,602 $96,458 $134,026
Basic average shares
outstanding 54,648 54,548 54,636 54,542
Diluted average shares
outstanding 54,761 54,699 54,765 54,708
Basic Per Share Data
Net income $0.69 $1.35 $1.77 $2.46
Net realized investment
gains, net of tax $0.05 $0.04 $0.13 $0.09
Diluted Per Share Data
Net income $0.69 $1.35 $1.76 $2.45
Net realized investment
gains, net of tax $0.05 $0.04 $0.13 $0.09
Operating Ratios
-- GAAP(a) Basis
Loss ratio 70.9% 62.6% 67.8% 64.0%
Expense ratio 27.7% 27.5% 27.5% 27.3%
Combined ratio 98.6% 90.1% 95.3% 91.3%
Reconciliations of
Operating Measures to
Comparable GAAP(a)
Measures
Net premiums written $753,826 $729,875 $1,527,846 $1,459,705
Increase in unearned
premiums (476) (22,614) (37,816) (67,730)
Net premiums earned $753,350 $707,261 $1,490,030 $1,391,975
Paid losses and loss
adjustment expenses $486,508 $422,055 $965,848 $846,727
Increase in net losses
and loss adjustment
expense reserves 47,808 20,709 43,648 44,283
Incurred losses and
loss adjustment
expenses $534,316 $442,764 $1,009,496 $891,010
(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,
2006 2005 2006 2005
Total California
Operations (1)
Net Premiums Written $552,144 $525,910 $1,118,051 $1,051,990
Net Premiums Earned 552,209 517,345 1,091,467 1,022,661
Loss Ratio 63.6% 61.5% 63.6% 63.6%
Expense Ratio 26.9% 25.6% 26.7% 25.7%
Combined Ratio 90.5% 87.1% 90.3% 89.3%
Non-California
Operations (2)
Net Premiums Written $201,682 $203,965 $409,795 $407,715
Net Premiums Earned 201,141 189,916 398,563 369,314
Loss Ratio 91.1% 65.7% 79.0% 65.1%
Expense Ratio 29.9% 32.7% 29.7% 32.0%
Combined Ratio 121.0% 98.4% 108.7% 97.1%
At June 30,
Policies-in-force (000's) 2006 2005
California Personal Auto 1,138 1,093
California Commercial Auto 21 21
Non-California Personal Auto 364 368
California Homeowners 253 228
Florida Homeowners 14 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)
June 30, 2006 December 31, 2005
Investments -- available for sale
Fixed maturities at market (amortized
cost $2,757,242 in 2006 and
$2,593,745 in 2005) $2,772,752 $2,645,555
Equity securities at market (cost
$239,232 in 2006 and $225,310 in 2005) 294,036 276,108
Short-term cash investments, at cost,
which approximates market 309,531 321,049
Total investments 3,376,319 3,242,712
Net receivables 400,445 390,234
Deferred policy acquisition costs 207,684 197,943
Other assets 196,013 210,662
Total assets $4,180,461 $4,041,551
Loss and loss adjustment expenses $1,058,171 $1,022,603
Unearned premiums 940,289 902,567
Other liabilities 409,920 365,004
Notes payable 138,744 143,540
Shareholders' equity 1,633,337 1,607,837
Total liabilities and shareholders'
equity $4,180,461 $4,041,551
Common stock -- shares outstanding 54,678 54,605
Book value per share $29.87 $29.44
Statutory surplus $1.5billion $1.5 billion
Portfolio duration 3.2 years 2.9 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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