Mercury General Corporation Announces First Quarter Results
LOS ANGELES, May 7 /PRNewswire-FirstCall/ -- Mercury General Corporation
(NYSE: MCY) reported today net income of $60.5 million ($1.10 per share-diluted)
in the first quarter 2007 compared with $58.6 million ($1.07 per share-diluted)
for the same period in 2006. Included in net income are net realized investment
losses, net of tax, of $0.7 million ($0.01 per share-diluted) in the first
quarter of 2007 compared with net realized investment gains, net of tax, of $4.2
million ($0.08 per share-diluted) for the same period in 2006.
Company-wide net premiums written were $785.9 million in the first quarter
2007, a 1.5% increase over first quarter 2006 net premiums written of $774.0
million. California net premiums written were $601.0 million in the first
quarter of 2007, an increase of 6.2% over the same period in 2006.
Non-California net premiums written were $184.9 million in the first quarter of
2007, an 11.2% decrease over the same period in 2006.
The Company's combined ratio (GAAP basis) was 94.5% in the first quarter of
2007 compared with 91.8% for the same period in 2006. Loss development on prior
accident years' loss reserves, which came primarily from the Company's
California operations, was approximately $13 million adverse and $10 million
positive for the quarters ended March 31, 2007 and 2006, respectively.
Net investment income of $42.1 million (after tax $35.7 million) in the
first quarter of 2007 increased by 7.0% over the same period in 2006. The
after-tax yield on investment income was 4.2% 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 4.1% on average investments of $3.2
billion (fixed maturities and equities at cost) for the same period in 2006.
As previously reported, included in net income in the first quarter 2006 is
an income tax charge, net of federal tax benefit, of approximately $15 million,
or $0.27 per share (diluted), relating to Notices of Proposed Assessments upheld
by the California State Board of Equalization ("SBE") for tax years 1993 through
1996 in which the California Franchise Tax Board disallowed a portion of the
Company's expenses related to management services provided to its insurance
company subsidiaries. The Company is challenging the SBE decision in Superior
Court.
The Board of Directors declared a second 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 June 28, 2007 to shareholders of record on
June 15, 2007. The Company's book value per share at March 31, 2007 was $32.30.
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 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 www.mercuryinsurance.com. A replay
of the call will be available beginning at 1:30 P.M. Pacific time and running
through May 14, 2007. The replay telephone numbers are (800) 642-1687 (USA) or
(706) 645-9291 (International). The conference ID# is 6300927. 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 March 31,
2007 2006
Net premiums written $785,883 $774,020
Net premiums earned 755,752 736,680
Paid losses and loss adjustment expenses 519,946 479,340
Incurred losses and loss adjustment expenses 509,759 475,180
Net investment income 42,145 39,403
Net realized investment (losses) gains,
net of tax (677) 4,195
Net income $60,453 $58,646
Basic average shares outstanding 54,674 54,623
Diluted average shares outstanding 54,821 54,745
Basic Per Share Data
Net income $1.11 $1.07
Net realized investment (losses) gains,
net of tax $(0.01) $0.08
Diluted Per Share Data
Net income $1.10 $1.07
Net realized investment (losses) gains,
net of tax $(0.01) $0.08
Operating Ratios -- GAAP (a) Basis
Loss ratio 67.5% 64.5%
Expense ratio 27.0% 27.3%
Combined ratio 94.5% 91.8%
Reconciliations of Operating Measures to
Comparable GAAP (a) Measures
Net premiums written $785,883 $774,020
Increase in unearned premiums (30,131) (37,340)
Net premiums earned $755,752 $736,680
Paid losses and loss adjustment expenses $519,946 $479,340
Decrease in net loss and loss adjustment
expense reserves (10,187) (4,160)
Incurred losses and loss adjustment
expenses $509,759 $475,180
(a) Generally Accepted Accounting Principles
Mercury General Corporation and Subsidiaries
Other Supplemental Information
(000's except ratios)
(unaudited)
Quarter Ended March 31,
2007 2006
California Operations (1)
Net Premiums Written $600,982 $565,908
Net Premiums Earned 573,517 539,257
Loss Ratio 65.2% 63.7%
Expense Ratio 26.0% 26.5%
Combined Ratio 91.2% 90.2%
Non-California Operations (2)
Net Premiums Written $184,901 $208,112
Net Premiums Earned 182,235 197,423
Loss Ratio 74.4% 66.7%
Expense Ratio 30.4% 29.4%
Combined Ratio 104.9% 96.1%
At March 31,
Policies-in-force (000's) 2007 2006
California Personal Auto 1,152 1,124
California Commercial Auto 20 21
Non-California Personal Auto 326 372
California Homeowners 264 247
Florida Homeowners 13 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)
March 31, 2007 December 31, 2006
Investments - available for sale
Fixed maturities at market
(amortized cost $2,888,100
in 2007 and $2,851,715 in 2006)
(includes hybrid financial
instruments: 2007 -- $12,745) $2,929,364 $2,898,987
Equity securities at market
(cost $282,448 in 2007 and
$258,310 in 2006) 362,229 318,449
Short-term investments, at cost,
which approximates market 244,438 282,302
Total investments 3,536,031 3,499,738
Net receivables 393,863 372,777
Deferred policy acquisition costs 216,191 209,783
Other assets 226,657 218,764
Total assets $4,372,742 $4,301,062
Losses and loss adjustment expenses $1,078,304 $1,088,822
Unearned premiums 980,428 950,344
Other liabilities 407,092 396,212
Notes payable 140,808 141,554
Shareholders' equity 1,766,110 1,724,130
Total liabilities and shareholders'
equity $4,372,742 $4,301,062
Common stock - shares outstanding 54,681 54,670
Book value per share $32.30 $31.54
Statutory surplus $1.6 billion $1.6 billion
Portfolio duration 4.5 years 4.0 years
SOURCE Mercury General Corporation
-0- 05/07/2007
/CONTACT: Theodore Stalick, VP/CFO of Mercury General Corporation,
+1-323-937-1060/
/Web site: http://www.mercuryinsurance.com /
(MCY)