Gabriel Tirador Appointed CEO Effective January 1, 2007
LOS ANGELES, Nov. 6 /PRNewswire-FirstCall/ -- Mercury General
Corporation (NYSE: MCY) reported today net income of $68.2 million ($1.25
per share- diluted) in the third quarter 2006 compared with $73.0 million
($1.33 per share-diluted) for the same period in 2005. For the first nine
months of 2006, net income was $164.7 million ($3.01 per share-diluted)
compared with net income of $207.0 million ($3.78 per share-diluted) for
the same period in 2005. Included in net income are net realized investment
gains, net of tax, of $1.7 million ($0.03 per share-diluted) in the third
quarter of 2006 compared with net realized investment gains, net of tax, of
$5.0 million ($0.09 per share-diluted) for the same period in 2005, and net
realized investment gains, net of tax, of $8.7 million ($0.16 per
share-diluted) for the first nine months of 2006 compared with net realized
investment gains, net of tax, of $10.0 million ($0.18 per share-diluted)
for the same period in 2005.
Company-wide net premiums written were $776.2 million in the third
quarter 2006, a 1.7% increase over third quarter 2005 net premiums written
of $762.9 million, and were approximately $2.3 billion for the first nine
months of 2006, a 3.7% increase over the same period in 2005. California
net premiums written were $573.1 million in the third quarter of 2006, an
increase of 5.1% over the same period in 2005, and were approximately $1.7
billion for the first nine months of 2006, a 5.9% increase over the same
period in 2005. Non-California net premiums written were $203.1 million in
the third quarter of 2006, a 6.7% decrease over the same period in 2005,
and were $612.8 million for the first nine months of 2006, a decrease of
2.0% over the same period in 2005.
The Company's combined ratio (GAAP basis) was 93.0% in the third
quarter and 94.5% for the first nine months of 2006 compared with 90.8% and
91.2% for the same periods in 2005. For the states outside of California,
the Company experienced adverse development for the nine months ended
September 30, 2006 of approximately $37 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 $19 million for the nine
months ended September 30, 2006 on its California business.
Net investment income of $36.9 million (after tax $30.7 million) in the
third quarter of 2006 increased by 19.4% over the same period in 2005. The
after-tax yield on investment income was 3.7% 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 3.4% on average
investments of $3.2 billion (fixed maturities and equities at cost) for the
same period in 2005.
The Company announced that George Joseph, Chief Executive Officer and
Chairman of the Board, will resign as CEO effective January 1, 2007. The
Board of Directors has appointed Gabriel Tirador to serve as President and
Chief Executive Officer effective January 1, 2007. Mr. Tirador has served
as President and Chief Operating Officer since October 2001. George Joseph
will remain as Chairman.
The Board of Directors declared a third quarter dividend of $0.48 per
share, representing an 11.6% increase over the same period in 2005. The
dividend is to be paid on December 28, 2006 to shareholders of record on
December 15, 2006. The Company's book value per share at September 30, 2006
was $30.98.
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
13, 2006. The replay telephone numbers are (800) 642-1687 (USA) or (706)
645-9291 (International). The conference ID# is 8732770. 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,
2006 2005 2006 2005
Net premiums written $776,186 $762,862 $2,304,032 $2,222,567
Net premiums earned 753,122 722,899 2,243,152 2,114,874
Paid losses and loss
adjustment expenses 483,466 436,672 1,449,314 1,283,399
Incurred losses and loss
adjustment expenses 491,129 464,709 1,500,625 1,355,719
Net investment income 36,857 30,857 112,502 90,343
Net realized investment
gains, net of tax 1,749 5,002 8,694 10,047
Net income $68,227 $73,014 $164,685 $207,040
Basic average shares
outstanding 54,662 54,578 54,645 54,554
Diluted average shares
outstanding 54,750 54,739 54,760 54,715
Basic Per Share Data
Net income $1.25 $1.34 $3.01 $3.80
Net realized investment
gains, net of tax $0.03 $0.09 $0.16 $0.18
Diluted Per Share Data
Net income $1.25 $1.33 $3.01 $3.78
Net realized investment
gains, net of tax $0.03 $0.09 $0.16 $0.18
Operating Ratios
-- GAAP (a) Basis
Loss ratio 65.2% 64.3% 66.9% 64.1%
Expense ratio 27.8% 26.5% 27.6% 27.1%
Combined ratio 93.0% 90.8% 94.5% 91.2%
Reconciliations of Operating
Measures to Comparable
GAAP (a) Measures
Net premiums written $776,186 $762,862 $2,304,032 $2,222,567
Increase in unearned
premiums (23,064) (39,963) (60,880) (107,693)
Net premiums earned $753,122 $722,899 $2,243,152 $2,114,874
Paid losses and loss
adjustment expenses $483,466 $436,672 $1,449,314 $1,283,399
Increase in net loss and
loss adjustment expense
reserves 7,663 28,037 51,311 72,320
Incurred losses and loss
adjustment expenses $491,129 $464,709 $1,500,625 $1,355,719
(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,
2006 2005 2006 2005
Total California
Operations (1)
Net Premiums Written $573,136 $545,293 $1,691,188 $1,597,283
Net Premiums Earned 556,342 524,887 1,647,809 1,547,548
Loss Ratio 61.7% 62.5% 63.0% 63.3%
Expense Ratio 26.5% 25.1% 26.6% 25.4%
Combined Ratio 88.2% 87.6% 89.6% 88.7%
Non-California
Operations (2)
Net Premiums Written $203,050 $217,569 $612,844 $625,284
Net Premiums Earned 196,780 198,012 595,343 567,326
Loss Ratio 75.1% 68.9% 77.7% 66.4%
Expense Ratio 31.4% 30.5% 30.2% 31.5%
Combined Ratio 106.5% 99.4% 107.9% 97.9%
At September 30,
Policies-in-force (000's) 2006 2005
California Personal Auto 1,140 1,096
California Commercial Auto 21 21
Non-California Personal Auto 352 370
California Homeowners 258 236
Florida Homeowners 14 16
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,
2006 2005
Investments - available for sale
Fixed maturities at market
(amortized cost $2,830,593 in 2006
and $2,593,745 in 2005) $2,880,398 $2,645,555
Equity securities at market
(cost $255,075 in 2006 and $225,310
in 2005) 303,393 276,108
Short-term cash investments, at cost,
which approximates market 289,024 321,049
Total investments 3,472,815 3,242,712
Net receivables 399,596 390,234
Deferred policy acquisition costs 213,720 197,943
Other assets 223,986 245,653
Total assets $4,310,117 $4,076,542
Losses and loss adjustment expenses $1,065,064 $1,022,603
Unearned premiums 963,365 902,567
Other liabilities 445,541 399,995
Notes payable 141,961 143,540
Shareholders' equity 1,694,186 1,607,837
Total liabilities and shareholders'
equity $4,310,117 $4,076,542
Common stock - shares outstanding 54,685 54,605
Book value per share $30.98 $29.44
Statutory surplus $1.5 billion $1.5 billion
Portfolio duration 3.3 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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