PRNewswire-FirstCall
LOS ANGELES
Feb 12, 2007
Mercury General Corporation (NYSE: MCY) reported today net income of $50.1 million ($0.91 per share-diluted) in the fourth quarter 2006 compared with $46.2 million ($0.84 per share-diluted) for the same period in 2005. For the year, net income was $214.8 million ($3.92 per share-diluted) compared with net income of $253.3 million ($4.63 per share-diluted) for the same period in 2005. Included in net income are net realized investment gains, net of tax, of $1.3 million ($0.02 per share-diluted) in the fourth quarter of 2006 compared with net realized investment gains, net of tax, of $0.5 million ($0.01 per share-diluted) for the same period in 2005, and net realized investment gains, net of tax, of $10.0 million ($0.18 per share-diluted) for the entire 2006 year compared with net realized investment gains, net of tax, of $10.5 million ($0.19 per share-diluted) for 2005.
Company-wide net premiums written were $740.7 million in the fourth quarter 2006, a 1.7% increase over fourth quarter 2005 net premiums written of $728.0 million, and were approximately $3.0 billion for the year, a 3.2% increase over the same period in 2005. California net premiums written were $558.5 million in the fourth quarter of 2006, an increase of 5.5% over the same period in 2005, and were approximately $2.2 billion for the year, a 5.8% increase over the same period in 2005. Non-California net premiums written were $182.2 million in the fourth quarter of 2006, an 8.2% decrease over the same period in 2005, and were $795.0 million for the year, a decrease of 3.5% over the same period in 2005.
The Company's combined ratio (GAAP basis) was 96.5% in the fourth quarter and 95.0% for the year compared with 96.0% and 92.4% for the same periods in 2005. Catastrophe losses did not impact the financial results during the fourth quarter 2006 as compared to the fourth quarter 2005 when losses caused by Hurricane Wilma increased the loss ratio by 3.3 points.
Loss development on prior accident years' loss reserves was approximately $20 million adverse and $45 million positive for the years ended December 31, 2006 and 2005, respectively. For business produced in California, positive development on prior accident years' loss reserves was approximately $15 million and $40 million for the years ended December 31, 2006 and 2005, respectively. For business produced outside of California, development on prior accident years' loss reserves was approximately $35 million adverse and $5 million positive for the years ended December 31, 2006 and 2005, respectively.
Net investment income of $38.6 million (after tax $33.9 million) in the fourth quarter of 2006 increased by 19.7% over the same period in 2005. The after-tax yield on investment income was 4.0% 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 $3.3 billion (fixed maturities and equities at cost) for the same period in 2005.
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 February 19, 2007. The replay telephone numbers are (800) 642-1687 (USA) or (706) 645-9291 (International). The conference ID# is 6946173. 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 Twelve Months Ended
December 31, December 31,
2006 2005 2006 2005
Net premiums written $740,742 $727,956 $3,044,774 $2,950,523
Net premiums earned 753,871 732,859 2,997,023 2,847,733
Paid losses and loss
adjustment expenses 495,573 460,510 1,944,887 1,743,909
Incurred losses and loss
adjustment expenses 521,021 507,217 2,021,646 1,862,936
Net investment income 38,597 32,239 151,099 122,582
Net realized investment gains,
net of tax 1,339 457 10,033 10,504
Net income $50,132 $46,219 $214,817 $253,259
Basic average shares
outstanding 54,669 54,603 54,651 54,566
Diluted average shares
outstanding 54,820 54,756 54,786 54,717
Basic Per Share Data
Net income $0.92 $0.85 $3.93 $4.64
Net realized investment gains,
net of tax $0.02 $0.01 $0.18 $0.19
Incurred losses from Florida
Hurricanes, net of tax
benefit -- $(0.29) -- $(0.33)
Diluted Per Share Data
Net income $0.91 $0.84 $3.92 $4.63
Net realized investment gains,
net of tax $0.02 $0.01 $0.18 $0.19
Incurred losses from Florida
Hurricanes, net of tax
benefit -- $(0.29) -- $(0.32)
Operating Ratios--GAAP (a)
Basis
Loss ratio 69.1% 69.2% 67.5% 65.4%
Expense ratio 27.4% 26.8% 27.5% 27.0%
Combined ratio 96.5% 96.0% 95.0% 92.4%
Impact of Florida Hurricanes
on loss ratio -- -3.3% -- -1.0%
Reconciliations of Operating
Measures to Comparable GAAP
(a) Measures
Net premiums written $740,742 $727,956 $3,044,774 $2,950,523
Decrease (increase) in
unearned premiums 13,129 4,903 (47,751) (102,790)
Net premiums earned $753,871 $732,859 $2,997,023 $2,847,733
Paid losses and loss
adjustment expenses $495,573 $460,510 $1,944,887 $1,743,909
Increase in net loss and loss
adjustment expense reserves 25,448 46,707 76,759 119,027
Incurred losses and loss
adjustment expenses $521,021 $507,217 $2,021,646 $1,862,936
(a) Generally Accepted Accounting Principles
Mercury General Corporation and Subsidiaries
Other Supplemental Information
(000's except ratios)
(unaudited)
Quarter Ended Twelve Months Ended
December 31, December 31,
2006 2005 2006 2005
California Operations(1)
Net Premiums Written $558,548 $529,542 $2,249,737 $2,126,825
Net Premiums Earned 562,992 532,493 2,210,801 2,080,041
Loss Ratio 66.4% 64.1% 63.9% 63.5%
Expense Ratio 25.8% 25.8% 26.4% 25.5%
Combined Ratio 92.2% 89.9% 90.3% 89.0%
Non-California Operations(2)
Net Premiums Written $182,194 $198,414 $795,037 $823,698
Net Premiums Earned 190,879 200,366 786,222 767,692
Loss Ratio 77.0% 82.7% 77.6% 70.7%
Expense Ratio 32.1% 29.8% 30.7% 31.0%
Combined Ratio 109.1% 112.5% 108.3% 101.7%
At December 31,
Policies-in-force (000's) 2006 2005
California Personal Auto 1,145 1,099
California Commercial Auto 20 21
Non-California Personal Auto 338 371
California Homeowners 261 242
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)
December 31, December 31,
2006 2005
Investments - available for sale
Fixed maturities at market
(amortized cost $2,851,715 in 2006
and $2,593,745 in 2005) $2,898,987 $2,645,555
Equity securities at market (cost
$258,310 in 2006 and $225,310 in
2005) 318,449 276,108
Short-term cash investments, at
cost, which approximates market 282,302 321,049
Total investments 3,499,738 3,242,712
Net receivables 372,777 364,560
Deferred policy acquisition costs 209,783 197,943
Other assets 218,764 245,653
Total assets $4,301,062 $4,050,868
Losses and loss adjustment expenses $1,088,822 $1,022,603
Unearned premiums 950,344 902,567
Other liabilities 396,212 374,321
Notes payable 141,554 143,540
Shareholders' equity 1,724,130 1,607,837
Total liabilities and shareholders'
equity $4,301,062 $4,050,868
Common stock - shares outstanding 54,670 54,605
Book value per share $31.54 $29.44
Statutory surplus $1.6 billion $1.5 billion
Portfolio duration 4.0 years 2.9 years
First Call Analyst:
FCMN Contact: jwalters@mercuryinsurance.com
SOURCE: Mercury General Corporation
CONTACT: Theodore Stalick, VP/CFO of Mercury General Corporation,
+1-323-937-1060
Web site: http://www.mercuryinsurance.com/