LOS ANGELES, Nov. 5 /PRNewswire-FirstCall/ -- Mercury General
Corporation (NYSE: MCY) reported today net income of $63.3 million ($1.15
per share-diluted) in the third quarter of 2007 compared with $68.2 million
($1.25 per share-diluted) for the same period in 2006. For the first nine
months of 2007, net income was $193.2 million ($3.52 per share-diluted)
compared with net income of $164.7 million ($3.01 per share-diluted) for
the same period in 2006. Included in net income are net realized investment
gains, net of tax, of $1.3 million ($0.02 per share-diluted) in the third
quarter of 2007 compared with net realized investment gains, net of tax, of
$1.7 million ($0.03 per share-diluted) for the same period in 2006, and net
realized investment gains, net of tax, of $7.1 million ($0.13 per
share-diluted) for the first nine months of 2007 compared with net realized
investment gains, net of tax, of $8.7 million ($0.16 per share-diluted) for
the same period in 2006.
Company-wide net premiums written were $758.8 million in the third
quarter 2007, a 2.2% decrease over third quarter 2006 net premiums written
of $776.2 million, and were approximately $2.3 billion for the first nine
months of 2007, a 1.0% decrease over the same period in 2006. California
net premiums written were $587.7 million in the third quarter of 2007, an
increase of 2.5% over the same period in 2006, and were approximately $1.8
billion for the first nine months of 2007, a 3.9% increase over the same
period in 2006. Non-California net premiums written were $171.1 million in
the third quarter of 2007, a 15.7% decrease over the same period in 2006,
and were $525.5 million for the first nine months of 2007, a decrease of
14.2% over the same period in 2006.
The Company's combined ratio (GAAP basis) was 94.2% both in the third
quarter and for the first nine months of 2007 compared with 93.0% and 94.5%
for the same periods in 2006. Loss development on prior accident years'
loss reserves was approximately $15 million adverse for the nine months
ended September 30, 2007, compared with approximately $18 million adverse
for the same period in 2006. Adverse loss development on prior accident
years' loss reserves for the first nine months of 2007 came primarily from
the Company's California operations. As previously reported, adverse loss
development on prior accident years' loss reserves for the first nine
months of 2006 included approximately $37 million adverse for the states
outside of California and $19 million positive on California business.
Net investment income of $39.2 million (after tax $33.9 million) in the
third quarter of 2007 increased by 6.4% over the same period in 2006. The
after-tax yield on investment income was 3.9% 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 3.7% on average
investments of $3.4 billion (fixed maturities and equities at cost) for the
same period in 2006.
In October 2007, the Southern California region was devastated by
sweeping fire storms. As of November 1, 2007, approximately 2,200 homes
have been reported as destroyed. The Company estimates its California
homeowners market share to be approximately 3%. As of November 1, 2007, the
Company has received 13 total property loss claims and 153 partial property
loss claims related to the fires and over 700 claims related to wind
damage. The Company anticipates that the number of reported claims will
increase but is uncertain as to the total number of claims that will
ultimately be reported.
The Board of Directors declared a quarterly 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 December 27, 2007 to
shareholders of record on December 14, 2007. The Company's book value per
share at September 30, 2007 was $33.73.
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
November 12, 2007. The replay telephone numbers are (800) 642-1687 (USA) or
(706) 645-9291 (International). The conference ID# is 20143783. 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 Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
Net premiums written $758,849 $776,186 $2,282,126 $2,304,032
Net premiums earned 748,798 753,122 2,258,626 2,243,152
Paid losses and loss
adjustment expenses 491,896 483,466 1,503,263 1,449,314
Incurred losses and loss
adjustment expenses 497,791 491,129 1,511,928 1,500,625
Net investment income 39,216 36,857 122,156 112,502
Net realized investment
gains, net of tax 1,332 1,749 7,147 8,694
Net income $63,278 $68,227 $193,240 $164,685
Basic average shares
outstanding 54,720 54,662 54,697 54,645
Diluted average shares
outstanding 54,851 54,750 54,830 54,760
Basic Per Share Data
Net income $1.16 $1.25 $3.53 $3.01
Net realized investment
gains, net of tax $0.02 $0.03 $0.13 $0.16
Diluted Per Share Data
Net income $1.15 $1.25 $3.52 $3.01
Net realized investment
gains, net of tax $0.02 $0.03 $0.13 $0.16
Operating Ratios-GAAP(a)
Basis
Loss ratio 66.5% 65.2% 66.9% 66.9%
Expense ratio 27.7% 27.8% 27.3% 27.6%
Combined ratio 94.2% 93.0% 94.2% 94.5%
Reconciliations of
Operating Measures to
Comparable GAAP (a)
Measures
Net premiums written $758,849 $776,186 $2,282,126 $2,304,032
Increase in unearned
premiums (10,051) (23,064) (23,500) (60,880)
Net premiums earned $748,798 $753,122 $2,258,626 $2,243,152
Paid losses and loss
adjustment expenses $491,896 $483,466 $1,503,263 $1,449,314
Increase in net loss and
loss adjustment expense
reserves 5,895 7,663 8,665 51,311
Incurred losses and loss
adjustment expenses $497,791 $491,129 $1,511,928 $1,500,625
(a) Generally Accepted Accounting Principles
Mercury General Corporation and Subsidiaries
Other Supplemental Information
(000's except ratios)
(unaudited)
Quarter Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
California Operations(1)
Net premiums written $587,708 $573,136 $1,756,594 $1,691,188
Net premiums earned 579,876 556,342 1,731,219 1,647,809
Loss ratio 64.1% 61.7% 64.5% 63.0%
Expense ratio 26.9% 26.5% 26.3% 26.6%
Combined ratio 91.0% 88.2% 90.8% 89.6%
Non-California Operations(2)
Net premiums written $171,141 $203,050 $525,532 $612,844
Net premiums earned 168,922 196,780 527,407 595,343
Loss ratio 74.8% 75.1% 75.0% 77.7%
Expense ratio 30.7% 31.4% 30.6% 30.2%
Combined ratio 105.5% 106.5% 105.6% 107.9%
At September 30,
Policies-in-force (000's) 2007 2006
California personal auto 1,130 1,140
California commercial auto 19 21
Non-California personal auto 297 352
California homeowners 268 258
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)
September 30, December 31,
2007 2006
Investments
Fixed maturities available for sale, at
market (amortized cost $2,834,897 in 2007
and $2,851,715 in 2006) (includes hybrid
financial instruments: $32,331 in 2007) $2,855,325 $2,898,987
Equity securities available for sale, at
market (cost $312,392 in 2007 and $258,310
in 2006) 417,132 318,449
Equity securities trading, at market (cost
$8,068 in 2007) 8,483 -
Short-term investments, at cost, which
approximates market 332,000 282,302
Total investments 3,612,940 3,499,738
Net receivables 393,943 372,777
Deferred policy acquisition costs 215,650 209,783
Other assets 255,297 218,764
Total assets $4,477,830 $4,301,062
Losses and loss adjustment expenses $1,097,678 $1,088,822
Unearned premiums 973,799 950,344
Notes payable 130,980 141,554
Other liabilities 429,701 396,212
Shareholders' equity 1,845,672 1,724,130
Total liabilities and shareholders' equity $4,477,830 $4,301,062
Common stock-shares outstanding 54,722 54,670
Book value per share $33.73 $31.54
Statutory surplus $1.7 billion $1.6 billion
Portfolio duration 4.8 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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