PRNewswire-FirstCall
LOS ANGELES
Aug 1, 2005
Mercury General Corporation (NYSE: MCY) reported today net income of $73.6 million ($1.35 per share-diluted) in the second quarter 2005 compared with $78.1 million ($1.43 per share-diluted) for the same period in 2004. For the first six months of 2005, net income was $134.0 million ($2.45 per share-diluted) compared to net income of $147.0 million ($2.69 per share-diluted) for the same period in 2004. Included in net income are net realized investment gains, net of tax, of $2.3 million ($0.04 per share-diluted) in the second quarter of 2005 compared with net realized investment gains, net of tax, of $7.9 million ($0.14 per share-diluted) for the same period in 2004, and net realized investment gains, net of tax, of $5.0 million ($0.09 per share-diluted) for the first six months of 2005 compared to net realized investment gains, net of tax, of $11.6 million ($0.21 per share-diluted) for the same period in 2004.
Company-wide net premiums written were $729.9 million in the second quarter 2005, a 12.6% increase over second quarter 2004 net premiums written of $648.5 million, and were approximately $1.5 billion for the first six months of 2005, a 14.2% increase over the same period in 2004. California net premiums written were $525.9 million in the second quarter of 2005, an increase of 5.5% over the same period in 2004, and were approximately $1.1 billion for the first six months of 2005, a 5.3% increase over the same period in 2004. Non-California net premiums written were $204.0 million in the second quarter of 2005, a 36.2% increase over the same period in 2004, and were $407.7 million for the first six months of 2005, an increase of 45.6% increase over the same period in 2004. Non-California net premiums written represented 27.9% of the Company's total second quarter net premiums written, up from 23.1% in the second quarter of 2004.
The Company's combined ratio (GAAP basis) was 90.1% in the second quarter and 91.3% for the first six months of 2005 compared with 88.3% and 88.7% for the same periods in 2004. Positive development on prior accident years' loss reserves was approximately $40 million and $25 million, respectively, for the six months ending June 30, 2005 and June 30, 2004.
Net investment income of $30.7 million (after tax $26.6 million) in the second quarter of 2005 increased by 17.1% over the same period in 2004. The after-tax yield on investment income was 3.6% on average assets of $3.0 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 $2.6 billion (fixed maturities and equities at cost) for the same period in 2004.
The Board of Directors declared a second quarter dividend of $0.43 per share, representing a 16% increase over the quarterly dividend amount paid in 2004. The dividend is to be paid on September 29, 2005 to shareholders of record on September 15, 2005. The Company's book value per share at June 30, 2005 was $28.44.
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 August 8, 2005. The replay telephone numbers are (800) 642-1687 (USA) or (706) 645-9291 (International). The conference ID# is 7791945. 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, and in general economic conditions; the accuracy and adequacy of the Company's pricing methodologies; adverse weather conditions in the markets serviced 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; inflation and changes in economic conditions; 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,
2005 2004 2005 2004
Net premiums written $729,875 $648,449 $1,459,705 $1,278,732
Net premiums earned 707,261 620,432 1,391,975 1,212,369
Paid losses and loss
adjustment expenses 422,055 348,993 846,727 711,899
Incurred losses and loss
adjustment expenses 442,764 380,526 891,010 752,522
Net investment income 30,701 26,212 59,486 51,940
Net realized investment
gains, net of tax 2,304 7,876 5,045 11,564
Net income $73,602 $78,134 $134,026 $146,950
Basic average shares
outstanding 54,548 54,459 54,542 54,445
Diluted average shares
outstanding 54,699 54,628 54,708 54,616
Basic Per Share Data
Net income $1.35 $1.43 $2.46 $2.70
Net realized investment
gains, net of tax $0.04 $0.14 $0.09 $0.21
Net income $1.35 $1.43 $2.45 $2.69
Net realized investment
gains, net of tax $0.04 $0.14 $0.09 $0.21
Operating Ratios -- GAAP
(a) Basis
Loss ratio 62.6% 61.3% 64.0% 62.1%
Expense ratio 27.5% 27.0% 27.3% 26.6%
Combined ratio 90.1% 88.3% 91.3% 88.7%
Reconciliations of
Operating Measures to
Comparable GAAP
(a) Measures
Net premiums written $729,875 $648,449 $1,459,705 $1,278,732
Increase in unearned
premiums (22,614) (28,017) (67,730) (66,363)
Net premiums earned $707,261 $620,432 $1,391,975 $1,212,369
Paid losses and loss
adjustment expenses $422,055 $348,993 $846,727 $711,899
Increase in net losses
and loss adjustment
expense reserves 20,709 31,533 44,283 40,623
Incurred losses and
loss adjustment
expenses $442,764 $380,526 $891,010 $752,522
(a) Generally Accepted Accounting Principles
Mercury General Corporation and Subsidiaries
Other Supplemental Information
(000's) except ratios
(unaudited)
Quarter ending, Six Months Ending,
June 30, June 30,
2005 2004 2005 2004
Total California
Operations (1)
Net Premiums Written $525,910 $498,697 $1,051,990 $998,795
Net Premiums Earned 517,345 495,137 1,022,661 979,919
Loss Ratio 61.5% 60.7% 63.6% 62.0%
Expense Ratio 25.6% 26.0% 25.7% 25.9%
Combined Ratio 87.1% 86.7% 89.3% 87.9%
California Automobile
lines
Net Premiums Written $470,069 $450,959 $950,713 $912,952
Net Premiums Earned 469,909 454,548 930,478 902,344
Loss Ratio 62.9% 62.7% 64.0% 63.7%
Expense Ratio 25.6% 26.1% 25.6% 25.9%
Combined Ratio 88.5% 88.8% 89.6% 89.6%
California Homeowners
line
Net Premiums Written $46,180 $39,725 $83,403 $71,751
Net Premiums Earned 38,997 33,375 76,333 64,843
Loss Ratio 47.9% 35.7% 60.4% 41.4%
Expense Ratio 23.9% 24.5% 24.3% 25.1%
Combined Ratio 71.8% 60.2% 84.7% 66.5%
Non-California
Operations (2)
Net Premiums Written $203,965 $149,752 $407,715 $279,937
Net Premiums Earned 189,916 125,295 369,314 232,450
Loss Ratio 65.7% 64.0% 65.1% 62.1%
Expense Ratio 32.7% 30.6% 32.0% 29.8%
Combined Ratio 98.4% 94.6% 97.1% 91.9%
At June 30,
Policies-in-force (000's) 2005 2004
California Personal Auto 1,093 1,048
California Commercial Auto 21 21
Non-California Personal Auto 368 252
California Homeowners 228 202
Florida Homeowners 15 13
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 Sheet and Other Information
(000's) except per-share amounts
June 30, 2005 December 31, 2004
(unaudited)
Investments -- available for sale
Fixed maturities at market
(amortized cost $2,335,149
in 2005 and $2,164,955 in 2004) $2,411,489 $2,245,311
Equity securities at market
(cost $206,698 in 2005 and
$210,553 in 2004) 259,637 254,362
Short-term cash investments,
at cost, which approximates market 443,784 421,369
Total investments 3,114,910 2,921,042
Net receivables 365,096 367,662
Deferred policy acquisition costs 189,998 174,840
Other assets 183,915 146,199
Total assets $3,853,919 $3,609,743
Loss and loss adjustment expenses $940,491 $900,744
Unearned premiums 867,450 799,679
Other liabilities 358,521 325,029
Notes payable 136,008 124,743
Shareholders' equity 1,551,449 1,459,548
Total liabilities and
shareholders' equity $3,853,919 $3,609,743
Common stock -- shares outstanding 54,561 54,515
Book value per share $28.44 $26.77
Statutory surplus $1.43 billion $1.36 billion
Portfolio duration 2.9 years 3.2 years
SOURCE: Mercury General Corporation
CONTACT: Theodore Stalick, VP/CFO of Mercury General Corporation,
+1-323-937-1060
Web site: http://www.mercuryinsurance.com/