|
4484
Wilshire Boulevard
Los
Angeles, California 90010
(323)
937-1060
Fax
(323) 857-7125
|
Press
Release
FOR MORE
INFORMATION, CONTACT:
Theodore
Stalick, VP/CFO
(323)
937-1060
www.mercuryinsurance.com
For
Release: August 3, 2009
Mercury
General Corporation Announces Second Quarter Results and Declares
Quarterly Dividend
Quarterly Dividend
Los Angeles, California…Mercury General
Corporation (NYSE: MCY) reported today for the second quarter of
2009:
Consolidated
Highlights
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||||||||||||||||||
|
June
30,
|
Change
|
June
30,
|
Change
|
|||||||||||||||||||||||||||||
|
2009
|
2008
|
$
|
%
|
2009
|
2008
|
$
|
%
|
|||||||||||||||||||||||||
|
(000's
except per-share amounts and ratios)
|
||||||||||||||||||||||||||||||||
|
Net
premiums written (1)
|
$ | 637,405 | $ | 684,177 | $ | (46,772 | ) | (6.8 | ) | $ | 1,308,297 | $ | 1,413,443 | $ | (105,146 | ) | (7.4 | ) | ||||||||||||||
|
Net
income
|
$ | 114,447 | $ | 70,726 | $ | 43,721 | 61.8 | $ | 211,100 | $ | 66,765 | $ | 144,335 | 216.2 | ||||||||||||||||||
|
Net
income per diluted share
|
$ | 2.07 | $ | 1.29 | $ | 0.78 | 60.5 | $ | 3.83 | $ | 1.22 | $ | 2.61 | 213.9 | ||||||||||||||||||
|
Operating
income (1)
|
$ | 47,336 | $ | 47,004 | $ | 332 | 0.7 | $ | 93,335 | $ | 102,932 | $ | (9,597 | ) | (9.3 | ) | ||||||||||||||||
|
Operating
income per diluted share (1)
|
$ | 0.86 | $ | 0.86 | $ | - | - | $ | 1.69 | $ | 1.88 | $ | (0.19 | ) | (10.1 | ) | ||||||||||||||||
|
Positive
(adverse) development on prior periods' loss reserves (2)
|
$ | 31,000 | $ | (9,000 | ) | $ | 40,000 | - | $ | 38,000 | $ | (17,000 | ) | $ | 55,000 | - | ||||||||||||||||
|
Severance
related expenses (2)
|
$ | - | $ | - | $ | - | - | $ | 8,000 | $ | - | $ | 8,000 | - | ||||||||||||||||||
|
Expense
related to amortization of AIS deferred policy acquisition costs (2)
(3)
|
$ | 3,000 |
NA
|
NA
|
NA
|
$ | 15,000 |
NA
|
NA
|
NA
|
||||||||||||||||||||||
|
Combined
ratio
|
96.1 | % | 97.0 | % |
(0.9)
pts
|
- | 96.5 | % | 96.2 | % |
0.3
pts
|
- | ||||||||||||||||||||
|
Combined
ratio-accident period basis (1)
|
100.8 | % | 95.8 | % |
5.0
pts
|
- | 99.4 | % | 95.1 | % |
4.3
pts
|
- | ||||||||||||||||||||
|
(1)
|
These
measures are not based on U.S. generally accepted accounting principles
(“GAAP”) and are defined and reconciled to the most directly comparable
GAAP measures in “Information Regarding Non-GAAP
Measures.”
|
|
(2)
|
The
amounts are estimated and rounded to the nearest
million.
|
|
(3)
|
Represents
the net expense related to Auto Insurance Specialists, LLC (“AIS”)
deferred commissions at December 31, 2008 amortized in 2009 partially
offset by deferred costs related to policy sales made by AIS in 2009. The
Company expects no material impact after the second quarter of
2009.
|
|
(NA)
|
Not
applicable
|
Net
income in the second quarter 2009 was $114.4 million ($2.07 per share-diluted)
compared with net income of $70.7 million ($1.29 per share-diluted) for the same
period in 2008. For the first six months of 2009, net income was
$211.1 million ($3.83 per share-diluted) compared with net income of $66.8
million ($1.22 per share-diluted) for the same period in
2008. Included in net income are net realized investment gains, net
of tax, of $67.1 million ($1.21 per share-diluted) in the second quarter of 2009
compared with net realized investment gains, net of tax, of $23.7 million ($0.43
per share-diluted) for the same period in 2008, and net realized investment
gains, net of tax, of $117.8 million ($2.14 per share-diluted) for the first six
months of 2009 compared with net realized investment losses, net of tax, of
$36.2 million ($0.66 per share) for the same period in
2008. Operating income was $47.3 million ($0.86 per share-diluted)
for the second quarter of 2009, a 0.7% increase over the same period in 2008,
and $93.3 million ($1.69 per share-diluted) for the first six months of 2009, a
9.3% decrease over the same period in 2008.
As a result of the adoption of SFAS No.
159, “The Fair Value Option for Financial Assets and Financial Liabilities”
(“SFAS No. 159”), changes in unrealized gains and losses on all investments that
prior to such adoption were recorded as changes to accumulated other
comprehensive income on the balance sheet are now recorded as realized gains and
losses on the statement of operations. Net realized investment gains,
net of tax, of $67.1 million for the second quarter of 2009 and $117.8 million
for the first six months of 2009 include gains, net of tax, of $80.4 million and
$139.3 million, respectively, in accordance with SFAS No.
159. Partially offsetting the gains were $15.9 million and $24.6
million in losses, net of tax, from the sale of securities during the second
quarter and during the first six months of 2009, respectively.
Company-wide net premiums written were
$637.4 million in the second quarter of 2009, a 6.8% decrease over the second
quarter 2008 net premiums written of $684.2 million, and were approximately $1.3
billion for the first six months of 2009, a 7.4% decrease over the same period
in 2008.
Net investment income of $36.2 million
(after tax $32.6 million) in the second quarter of 2009 decreased by 7.1% over
the same period in 2008. The after-tax yield on investment income was
4.1% on average investments of $3.2 billion (fixed maturities, equities and
short-term investments at cost) for the second quarter. This compares
with an after-tax yield on investment income of 4.0% on average investments of
$3.5 billion (fixed maturities, equities and short-term investments at cost) for
the same period in 2008. Net investment income for the first six
months of 2009 was $74.1 million (after tax $66.0 million), a decrease of 5.3%
over the same period in 2008. The after-tax yield on investment
income was 4.1% on average assets of $3.2 billion (fixed maturities, equities
and short-term investments at cost) for the first six months of
2009. This compares with an after-tax yield on investment income of
4.0% on average investments of $3.5 billion (fixed maturities, equities and
short-term investments at cost) for the same period in 2008.
The Board
of Directors declared a quarterly dividend of $0.58 per share. The dividend is
to be paid on September 30, 2009 to shareholders of record on September 16,
2009.
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 9, 2009. The replay telephone numbers are (800) 642-1687
(USA) or (706) 645-9291 (International). The conference ID# is
20297214. 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, including the impact of current economic conditions on the Company's
market and investment portfolio; the accuracy and adequacy of the Company’s
pricing methodologies; adverse weather conditions or natural disasters in the
markets served by the Company; general 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 managing 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.
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 U.S. generally accepted accounting
principles. These measures are not intended to replace, and should be read in
conjunction with, the GAAP financial results.
Operating income
is net income
excluding realized investment gains and losses, net of tax. Net
income is the GAAP measure that is most directly comparable to operating
income.
Operating
income is used by management along with the other components of net income to
assess the Company’s performance. Management uses operating income as an
important measure to evaluate the results of the Company’s insurance business.
Management believes that operating income provides investors with a valuable
measure of the Company’s ongoing performance as it reveals trends in the
Company’s insurance business that may be obscured by the net effect of realized
capital gains and losses. Realized capital gains and losses may vary
significantly between periods and are generally driven by external economic
developments such as capital market conditions. Accordingly, operating income
excludes the effect of items that tend to be highly variable from period to
period and highlights the results from ongoing operations and the underlying
profitability of the Company’s core insurance business. Therefore, the Company
believes that it is useful for investors to evaluate net income and operating
income separately when reviewing and evaluating its
performance. Operating income is meant as supplemental information
and it should not be considered as a substitute for net income and does not
reflect the overall profitability of our business. It should be read
in conjunction with the GAAP financial results. The Company has
reconciled operating income with the most directly comparable GAAP measure in
the table below.
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||||||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||||||||||||||||||
|
Total
|
Per
diluted share
|
Total
|
Per
diluted share (1)
|
|||||||||||||||||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||||||||||||||
|
(000's
except per-share amounts)
|
||||||||||||||||||||||||||||||||
|
Operating
income
|
$ | 47,336 | $ | 47,004 | $ | 0.86 | $ | 0.86 | $ | 93,335 | $ | 102,932 | $ | 1.69 | $ | 1.88 | ||||||||||||||||
|
Net
realized investment gains (losses), net of tax
|
67,111 | 23,722 | 1.21 | 0.43 | 117,765 | (36,167 | ) | 2.14 | (0.66 | ) | ||||||||||||||||||||||
|
Net
income
|
$ | 114,447 | $ | 70,726 | $ | 2.07 | $ | 1.29 | $ | 211,100 | $ | 66,765 | $ | 3.83 | $ | 1.22 | ||||||||||||||||
|
(1)
|
The
dilutive impact of incremental shares is excluded from loss positions in
2008 in accordance with GAAP.
|
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. The Company has reconciled
net premiums written with the most directly comparable GAAP measure in the
supplemental schedule entitled, “Summary of Operating 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. The Company has reconciled paid losses and loss adjustment expenses
with the most directly comparable GAAP measure in the supplemental schedule
entitled, “Summary of Operating Results.”
Combined ratio-accident period basis
is computed as the difference between two GAAP operating ratios: the
combined ratio and the effect of prior accident periods’ loss development. The
most directly comparable GAAP measure is the combined ratio. The Company
believes that this ratio is useful to investors and it is used by management to
reveal the trends in the Company’s business that may be obscured by development
on prior accident periods’ loss reserves. Combined ratio-accident period basis
is meant as supplemental information and is not intended to replace combined
ratio. It should be read in conjunction with the GAAP financial results. The
Company has reconciled combined ratio-accident period basis with the most
directly comparable GAAP measure in the table below.
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
Combined
ratio-accident period basis
|
100.8 | % | 95.8 | % | 99.4 | % | 95.1 | % | ||||||||
|
Effect
of estimated prior periods' loss development
|
-4.7 | % | 1.2 | % | -2.9 | % | 1.1 | % | ||||||||
|
Combined
ratio
|
96.1 | % | 97.0 | % | 96.5 | % | 96.2 | % | ||||||||
|
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,
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
Net
premiums written
|
$ | 637,405 | $ | 684,177 | $ | 1,308,297 | $ | 1,413,443 | ||||||||
|
Net
premiums earned
|
659,211 | 711,204 | 1,325,274 | 1,432,120 | ||||||||||||
|
Paid
losses and loss adjustment expenses
|
467,333 | 511,322 | 952,799 | 1,056,254 | ||||||||||||
|
Incurred
losses and loss adjustment expenses
|
445,463 | 489,545 | 889,755 | 973,018 | ||||||||||||
|
Net
investment income
|
36,212 | 38,995 | 74,126 | 78,294 | ||||||||||||
|
Net
realized investment gains (losses), net of tax
|
67,111 | 23,722 | 117,765 | (36,167 | ) | |||||||||||
|
Net
income
|
$ | 114,447 | $ | 70,726 | $ | 211,100 | $ | 66,765 | ||||||||
|
Basic
average shares outstanding
|
54,770 | 54,734 | 54,769 | 54,732 | ||||||||||||
|
Diluted
average shares outstanding
|
55,320 | 54,997 | 55,166 | 54,895 | ||||||||||||
|
Basic Per Share Data
|
||||||||||||||||
|
Net
income
|
$ | 2.09 | $ | 1.29 | $ | 3.85 | $ | 1.22 | ||||||||
|
Net
realized investment gains (losses), net of tax
|
$ | 1.23 | $ | 0.43 | $ | 2.15 | $ | (0.66 | ) | |||||||
|
Diluted Per Share Data
|
||||||||||||||||
|
Net
income
|
$ | 2.07 | $ | 1.29 | $ | 3.83 | $ | 1.22 | ||||||||
|
Net
realized investment gains (losses), net of tax (a)
|
$ | 1.21 | $ | 0.43 | $ | 2.14 | $ | (0.66 | ) | |||||||
|
Operating Ratios-GAAP Basis
|
||||||||||||||||
|
Loss
ratio
|
67.6 | % | 68.8 | % | 67.2 | % | 67.9 | % | ||||||||
|
Expense
ratio
|
28.5 | % | 28.2 | % | 29.3 | % | 28.3 | % | ||||||||
|
Combined
ratio
|
96.1 | % | 97.0 | % | 96.5 | % | 96.2 | % | ||||||||
|
Reconciliations of Operating Measures to
Comparable GAAP Measures
|
||||||||||||||||
|
Net
premiums written
|
$ | 637,405 | $ | 684,177 | $ | 1,308,297 | $ | 1,413,443 | ||||||||
|
Increase
in unearned premiums
|
21,806 | 27,027 | 16,977 | 18,677 | ||||||||||||
|
Net
premiums earned
|
$ | 659,211 | $ | 711,204 | $ | 1,325,274 | $ | 1,432,120 | ||||||||
|
Paid
losses and loss adjustment expenses
|
$ | 467,333 | $ | 511,322 | $ | 952,799 | $ | 1,056,254 | ||||||||
|
Decrease
in net loss and loss adjustment expense reserves
|
(21,870 | ) | (21,777 | ) | (63,044 | ) | (83,236 | ) | ||||||||
|
Incurred
losses and loss adjustment expenses
|
$ | 445,463 | $ | 489,545 | $ | 889,755 | $ | 973,018 | ||||||||
(a) The
dilutive impact of incremental shares in 2008 is excluded from loss positions in
accordance with GAAP
Mercury
General Corporation and Subsidiaries
Condensed
Balance Sheets and Other Information
(000's
except per-share amounts and ratios)
(unaudited)
|
June 30, 2009
|
December 31, 2008
|
|||||||
|
Investments:
|
||||||||
|
Fixed
maturities trading, at fair value (amortized cost $2,724,175;
$2,728,471)
|
$ | 2,624,812 | $ | 2,481,673 | ||||
|
Equity
securities trading, at fair value (cost $348,285;
$403,773)
|
258,813 | 247,391 | ||||||
|
Short-term
investments, at fair value (amortized cost $94,574;
$208,278)
|
94,557 | 204,756 | ||||||
|
Total
investments
|
2,978,182 | 2,933,820 | ||||||
|
Net
receivables
|
328,391 | 339,992 | ||||||
|
Deferred
policy acquisition costs
|
181,132 | 200,005 | ||||||
|
Other
assets
|
654,166 | 476,378 | ||||||
|
Total
assets
|
$ | 4,141,871 | $ | 3,950,195 | ||||
|
Losses
and loss adjustment expenses
|
$ | 1,070,003 | $ | 1,133,508 | ||||
|
Unearned
premiums
|
862,706 | 879,651 | ||||||
|
Notes
payable
|
273,426 | 158,625 | ||||||
|
Other
liabilities
|
293,190 | 284,360 | ||||||
|
Shareholders'
equity
|
1,642,546 | 1,494,051 | ||||||
|
Total
liabilities and shareholders' equity
|
$ | 4,141,871 | $ | 3,950,195 | ||||
|
Common
stock-shares outstanding
|
54,770 | 54,764 | ||||||
|
Book
value per share
|
$ | 29.99 | $ | 27.28 | ||||
|
Estimated
statutory surplus
|
$
|
1.4
billion
|
$
|
1.4
billion
|
||||
|
Estimated
premiums written to surplus ratio
|
1.9 | 2.0 | ||||||
|
Debt
to total capital ratio
|
14.3 | % | 9.6 | % | ||||
|
Portfolio
duration
|
6.1
years
|
6.5
years
|
||||||
|
Policies-in-Force
(Companywide "PIF")
|
||||||||
|
Personal
Auto PIF
|
1,304 | 1,321 | ||||||
|
Homeowners
PIF
|
315 | 303 | ||||||
Page
7