Mercury General Corporation (NYSE: MCY) reported today that net income was $68.8 million, or $1.26 per share (diluted), in the first quarter 2004 compared with $42.1 million, or $0.77 per share (diluted), in the same period for 2003. Included in net income are net realized investment gains, net of tax, of $3.7 million, or $0.07 per share (diluted), in the first quarter of 2004 compared with net realized investment losses, net of tax benefit, of $0.5 million, or $0.01 per share (diluted), for the same period in 2003.
Company-wide net premiums written were $630.3 million in the first quarter 2004, a 17% increase over first quarter 2003 net premiums written of $538.8 million. California net premiums written were $500.1 million in the quarter, an increase of approximately 10% over 2003. Non-California net premiums written were $130.2 million in the quarter, a 52% increase over 2003. Non-California net premiums represented approximately 21% of the Company's total first quarter net premiums written, up from 16% in the first quarter of 2003.
The Company's combined ratio (GAAP basis) was 89.1% in the first quarter of 2004 compared with 94.4% in the same period for 2003. Rate increases taken during 2003 and positive development of approximately $15 million on the 2003 and prior period accident year loss reserves contributed to the improvement in the combined ratio.
Net investment income of $25.7 million (after tax $22.9 million) in the first quarter of 2004 decreased by 4.4% over the same period in 2003. The after-tax yield on investment income was 3.7% on average assets of $2.5 billion (fixed maturities and equities at cost) for the quarter. This compares with an after tax yield on investment income of 4.3% on average investments of $2.2 billion (fixed maturities and equities at cost) for the same period in 2003.
In 2003, the Company surpassed three of its California competitors moving up from the sixth largest writer of private passenger automobile insurance in California to become the third largest based on direct premiums written. The Company began issuing private passenger automobile insurance policies in Arizona in April 2004 marking the 10th state where the Company sells automobile insurance.
The Board of Directors declared a second quarter dividend of $0.37 per share, representing a 12% increase over the quarterly dividend amount paid in 2003. The dividend is to be paid on June 30, 2004 to shareholders of record on June 15, 2004. The Company's book value per share at March 31, 2004 was $24.10.
Mercury General Corporation and its subsidiaries are a multiple line insurance organization offering predominantly personal automobile and homeowners insurance through a network of independent agents and brokers in many states. For more information, visit our 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 1 (877) 807-1888 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 10, 2004. The replay telephone numbers are 1 (800) 642-1687 (USA) or 1 (706) 645-9291 (International). The conference ID# is 6811255. The replay will also be available on our 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; market risks associated with the Company's investment portfolio; uncertainties related to estimates, assumptions and projections generally; the possibility actual loss experience may vary adversely from the actuarial estimates made to determine the Company's loss reserves; 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 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 useful industry specific information to 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.
Mercury General Corporation and Subsidiaries Summary of Operating Results (000's) except per-share amounts (unaudited) Quarter Ended March 31, 2004 2003 Net premiums written $630,283 $538,750 Net premiums earned 591,937 500,666 Paid losses and loss adjustment expenses 362,906 320,599 Incurred losses and loss adjustment expenses 371,996 341,546 Net investment income 25,728 26,926 Net realized investment gains (losses), net of tax 3,688 (493) Net income $68,816 $42,108 Basic average shares outstanding 54,430 54,379 Diluted average shares outstanding 54,607 54,490 Basic Per Share Data Net income $1.26 $0.77 Net realized investment gains (losses), net of tax $0.07 ($0.01) Diluted Per Share Data Net income $1.26 $0.77 Net realized investment gains (losses), net of tax $0.07 ($0.01) Operating Ratios -- GAAP (a) Basis Loss ratio 62.8% 68.2% Expense ratio 26.3% 26.2% Combined ratio 89.1% 94.4% Reconciliations of Operating Measures to Comparable GAAP (a) Measures Net premiums written $630,283 $538,750 Increase in unearned premiums (38,346) (38,084) Net premiums earned $591,937 $500,666 Paid losses and loss adjustment expenses $362,906 $320,599 Increase in net losses and loss adjustment expense reserves 9,090 20,947 Incurred losses and loss adjustment expenses $371,996 $341,546 (a) Generally Accepted Accounting Principles Mercury General Corporation and Subsidiaries Other Supplemental Information (000's) except ratios (unaudited) Quarter ending, March 31, 2004 2003 Total California Operations (1) Net Premiums Written $500,098 $452,946 Net Premiums Earned 484,782 423,012 Loss Ratio 63.5% 70.0% Expense Ratio 25.7% 25.6% Combined Ratio 89.2% 95.6% California Automobile lines Net Premiums Written $461,993 $420,975 Net Premiums Earned 447,796 393,924 Loss Ratio 64.7% 70.4% Expense Ratio 25.6% 25.1% Combined Ratio 90.3% 95.5% California Homeowners line Net Premiums Written $32,026 $26,539 Net Premiums Earned 31,468 23,991 Loss Ratio 47.4% 70.3% Expense Ratio 25.8% 26.1% Combined Ratio 73.2% 96.4% Non-California Operations (2) Net Premiums Written $130,185 $85,804 Net Premiums Earned 107,155 77,654 Loss Ratio 60.0% 58.5% Expense Ratio 28.8% 29.5% Combined Ratio 88.8% 88.0% At At Policies-in-force (000's) March 31, March 31, 2004 2003 California Personal Auto 1,041 981 California Commercial Auto 21 19 Non-California Personal Auto 216 158 California Homeowners 196 163 Florida Homeowners 11 7 All ratios are calculated on GAAP basis. (1) Total California operations 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 March 31, December 31, 2004 2003 Investments - available for sale Fixed maturities at market (amortized cost $1,978,494 in 2004 and $1,856,083 in 2003) $2,077,509 $1,945,309 Equity securities at market (cost $224,058 in 2004 and $223,113 in 2003) 266,742 264,393 Short-term cash investments, at cost, which approximates market 287,549 329,812 Total investments 2,631,800 2,539,514 Net receivables 317,619 299,094 Deferred policy acquisition costs 142,126 132,059 Other assets 167,094 149,099 Total assets $3,258,639 $3,119,766 Loss and loss adjustment expenses $805,651 $797,927 Unearned premiums 700,708 663,004 Other liabilities 315,461 278,618 Notes payable 124,721 124,714 Shareholders' equity 1,312,098 1,255,503 Total liabilities and shareholders' equity $3,258,639 $3,119,766 Common stock - shares outstanding 54,447 54,424 Book value per share $24.10 $23.07 Statutory surplus $1.20 billion $1.17 billion Portfolio duration 3.6 years 3.8 years
SOURCE: Mercury General Corporation
CONTACT: Theodore Stalick, VP/CFO of Mercury General Corporation,
Web site: http://www.mercuryinsurance.com/