Mercury General Corporation (NYSE: MCY), a major California automobile insurer with operations in a number of other states, reported today that net income was $1.3 million, or $0.02 per share (diluted) for the second quarter 2002 compared with $26.5 million, or $0.49 per share (diluted) in the same period for 2001. Net operating earnings for the second quarter of 2002 were $33.1 million, or $0.61 per share, compared with $26.5 million, or $0.49 per share in 2001. Net operating earnings are defined as net income excluding net realized investment gains and losses. For the first six months of 2002, net income and net operating earnings were $30.3 million ($0.56 per share), and $61.9 million ($1.14 per share), respectively which compares to net income and net operating earnings in the same period for 2001 of $51.2 million ($0.94 per share) and $48.4 million ($0.89 per share), respectively.
During the second quarter of 2002, the Company recorded realized losses on investments of $31.8 million, net of tax or $0.58 per share (diluted). Included in the realized losses are $30.3 million, net of taxes of asset write-downs for investments that were considered to be other-than-temporarily impaired. The asset write-downs were on investments made in the telecommunications and energy sectors.
Net unrealized gains recorded on investments, reflected as an increase to shareholders' equity on the balance sheet, increased by $24.6 million, net of tax during the second quarter. Lower interest rates at the end of the second quarter positively impacted the market values of the Company's municipal bond portfolio.
Company-wide premiums written were $447.3 million in the quarter, a 27.5% increase over 2001 and $868.8 million for the six month period, a 25.2% increase over 2001. California premiums written were $380.7 million in the quarter, a 23.8% increase over 2001 and $740.7 million for the six-month period, a 21.2% increase over 2001. The increased premiums were driven by both policy count growth and higher average premiums.
The loss ratio (GAAP basis) was 70.9% in the second quarter and 71.4% in the first six-months of 2002 compared to 72.0% and 73.1% in the respective periods in 2001. The expense ratio (GAAP basis) was 26.0% in the second quarter and 26.3% in the first six-months of 2002 compared to 26.5% and 26.7% in the respective periods in 2001.
Investment income increased by 3.9% to $29.0 million for the quarter and by 4.6% to $58.5 million for the six-month period. After taxes, per share (diluted) investment income was $0.46 in the quarter and $0.93 for the six months, compared with $0.45 and $0.90 for the respective periods in 2001. The after-tax yield was 5.07% on average investments of $1.99 billion (fixed maturities and equities at cost) for the quarter. This compares to 5.43% in the second quarter of 2001.
On July 26, 2002, the Board of Directors declared a quarterly dividend of $0.30 per share. The dividend is to be paid on September 26, 2002 to shareholders of record on September 13, 2002. The Company's book value per share at June 30, 2002 was $19.90 compared to $19.72 at both March 31, 2002 and December 31, 2001.
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; market risks associated with the Company's investment portfolio; the possibility actual loss experience may vary adversely from the actuarial estimates made to determine the Company's loss reserves; legislation adverse to the automobile insurance industry or business generally may be enacted in California or other states; the presence of competitors with greater financial resources and the impact of competitive pricing 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 SUMMARY OF OPERATING RESULTS (000) Quarter Ended June 30, 2002 2001 Net Premiums Written $447,346 $350,745 Net Premiums Earned 418,146 338,171 Paid Losses and Loss Adjustment Expenses 271,547 227,156 Incurred Losses 296,568 243,421 Net Investment Income 29,026 27,941 Net Operating Income (a) 33,103 26,524 Capital Losses, net of tax (31,802) (59) Net Income $1,301 $26,465 Basic Average Shares Outstanding 54,305,751 54,167,143 Diluted Average Shares Outstanding 54,535,129 54,353,257 Basic Per Share Data Earnings Per Share $0.02 $0.49 Diluted Per Share Data (c) Net Operating Income $0.61 $0.49 Capital Gains (Losses), net of tax ($0.58) ($0.00) Earnings Per Share $0.02 $0.49 Operating Ratios--GAAP Basis (b) Loss Ratio 70.9% 72.0% Expense Ratio 26.0% 26.5% Combined Ratio 96.9% 98.5% Six Months Ended June 30, 2002 2001 Net Premiums Written $868,847 $693,957 Net Premiums Earned 804,783 661,943 Paid Losses and Loss Adjustment Expenses 531,183 471,224 Incurred Losses 574,669 483,638 Net Investment Income 58,530 55,960 Net Operating Income (a) 61,902 48,383 Capital Gains (Losses), net of tax (31,647) 2,790 Net Income $30,255 $51,173 Basic Average Shares Outstanding 54,285,508 54,160,716 Diluted Average Shares Outstanding 54,498,678 54,352,126 Basic Per Share Data Earnings Per Share $0.56 $0.94 Diluted Per Share Data Net Operating Income $1.14 $0.89 Capital Gains (Losses), net of tax ($0.58) $0.05 Earnings Per Share $0.56 $0.94 Operating Ratios--GAAP Basis (b)(c) Loss Ratio 71.4% 73.1% Expense Ratio 26.3% 26.7% Combined Ratio 97.7% 99.7% (a) Net Income, excluding capital gains (losses), net of tax (b) Generally Accepted Accounting Principles (c) Some numbers may not sum due to rounding
SOURCE: Mercury General Corporation
CONTACT: Theodore Stalick, VP/CFO of Mercury General Corporation,
Web site: http://www.mercuryinsurance.com/