Mercury General Corporation (NYSE: MCY) reported today net income of $78.1 million, or $1.43 per share (diluted), in the second quarter 2004 compared with $43.4 million, or $0.80 per share (diluted), in the same period for 2003. For the first six months of 2004, net income was $147.0 million ($2.69 per share-diluted) compared to net income of $85.5 million ($1.57 per share-diluted) in the same period for 2003. Included in net income are net realized gains, net of tax, of $7.9 million ($0.14 per share-diluted) in the second quarter 2004 compared to net realized losses, net of tax benefit, of $0.1 million ($0.00 per share-diluted) for the second quarter 2003, and net realized gains, net of tax, of $11.6 million ($0.21 per share-diluted) for the first six months of 2004 compared to net realized losses, net of tax benefit, of $0.6 million ($0.01 per share-diluted) for the same period in 2003.
Company-wide net premiums written were $648.5 million in the second quarter 2004, an 18.2% increase over second quarter 2003 net premiums written of $548.5 million, and were $1,278.7 million for the first six months of 2004, a 17.6% increase over the same period in 2003. California net premiums written were $498.7 million in the quarter, an increase of approximately 8.5% over 2003, and were $998.8 million for the first six months of 2004, a 9.5% increase over the same period in 2003. Non-California net premiums written were $149.8 million in the quarter, a 68.5% increase over 2003, and were $279.9 million for the first six months of 2004, a 60.3% increase over the same period in 2003. Non-California net premiums written represented approximately 23.1% of the Company's total second quarter net premiums written, up from 16.2% in the second quarter of 2003.
The Company's combined ratio (GAAP basis) was 88.3% in the second quarter and 88.7% for the first six months of 2004 compared with 94.3% for both the second quarter and the six month period in 2003. Rate increases taken during 2003 and positive development of approximately $25 million for the six month period ended June 30, 2004 on the 2003 and prior accident year loss reserves contributed to the improvement in the combined ratio.
Net investment income of $26.2 million (after tax $23.2 million) in the second quarter of 2004 decreased by 1.9% compared to the same period in 2003. The after-tax yield on investment income was 3.6% on average assets of $2.6 billion (fixed maturities and equities at cost) for the quarter. This compares with an after tax yield on investment income of 4.2% on average investments of $2.3 billion (fixed maturities and equities at cost) for the same period in 2003.
In June 2004, the Company began writing private passenger automobile insurance in Pennsylvania, marking the eleventh state in which the Company writes automobile insurance.
On July 30, 2004, the Board of Directors declared a quarterly dividend of $0.37 per share for the second quarter, representing a 12% increase over the quarterly dividend amount paid in 2003. The dividend is to be paid on September 30, 2004 to shareholders of record on September 15, 2004. The Company's book value per share at June 30, 2004 was $24.29.
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 (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 August 9, 2004. The replay telephone numbers are (800) 642-1687 (USA) or (706) 645-9291 (International). The conference ID# is 8698528. 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; 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.
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 (unaudited) Quarter Ended Six Months Ended June 30, June 30, 2004 2003 2004 2003 Net premiums written $648,449 $548,451 $1,278,732 $1,087,201 Net premiums earned 620,432 525,072 1,212,369 1,025,738 Paid losses and loss adjustment expenses 348,993 333,126 711,899 653,725 Incurred losses and loss adjustment expenses 380,526 357,565 752,522 699,111 Net investment income 26,212 26,718 51,940 53,644 Net realized investment gains (losses), net of tax 7,876 (112) 11,564 (606) Net income $78,134 $43,372 $146,950 $85,480 Basic average shares outstanding 54,459 54,403 54,445 54,391 Diluted average shares outstanding 54,628 54,547 54,616 54,518 Basic Per Share Data Net income $1.43 $0.80 $2.70 $1.57 Net realized investment gains (losses), net of tax $0.14 $0.00 $0.21 ($0.01) Diluted Per Share Data Net income $1.43 $0.80 $2.69 $1.57 Net realized investment gains (losses), net of tax $0.14 $0.00 $0.21 ($0.01) Operating Ratios -- GAAP (a) Basis Loss ratio 61.3% 68.1% 62.1% 68.1% Expense ratio 27.0% 26.2% 26.6% 26.2% Combined ratio 88.3% 94.3% 88.7% 94.3% Reconciliations of Operating Measures to Comparable GAAP (a) Measures Net premiums written $648,449 $548,451 $1,278,732 $1,087,201 Increase in unearned premiums (28,017) (23,379) (66,363) (61,463) Net premiums earned $620,432 $525,072 $1,212,369 $1,025,738 Paid losses and loss adjustment expenses $348,993 $333,126 $711,899 $653,725 Increase in net losses and loss adjustment expense reserves 31,533 24,439 40,623 45,386 Incurred losses and loss adjustment expenses $380,526 $357,565 $752,522 $699,111 (a) Generally Accepted Accounting Principles Mercury General Corporation and Subsidiaries Other Supplemental Information (000's) except ratios (unaudited) Quarter ending, Six Months Ended, June 30, June 30, 2004 2003 2004 2003 Total California Operations (1) Net Premiums Written $498,697 $459,564 $998,795 $912,511 Net Premiums Earned 495,137 443,821 979,919 866,834 Loss Ratio 60.7% 68.5% 62.0% 69.3% Expense Ratio 26.0% 25.5% 25.9% 25.5% Combined Ratio 86.7% 94.0% 87.9% 94.8% California Automobile lines Net Premiums Written $450,959 $421,092 $912,952 $842,066 Net Premiums Earned 454,548 412,500 902,344 806,423 Loss Ratio 62.7% 69.0% 63.7% 69.7% Expense Ratio 26.1% 25.1% 25.9% 25.1% Combined Ratio 88.8% 94.1% 89.6% 94.8% California Homeowners line Net Premiums Written $39,725 $31,850 $71,751 $58,389 Net Premiums Earned 33,375 25,953 64,843 49,944 Loss Ratio 35.7% 58.7% 41.4% 64.2% Expense Ratio 24.5% 25.8% 25.1% 26.0% Combined Ratio 60.2% 84.5% 66.5% 90.2% Non-California Operations (2) Net Premiums Written $149,752 $88,887 $279,937 $174,690 Net Premiums Earned 125,295 81,251 232,450 158,904 Loss Ratio 64.0% 65.6% 62.1% 62.1% Expense Ratio 30.6% 29.9% 29.8% 29.7% Combined Ratio 94.6% 95.5% 91.9% 91.8% At At June 30, June 30, Policies-in-force (000's) 2004 2003 California Personal Auto 1,048 1,009 California Commercial Auto 21 19 Non-California Personal Auto 252 160 California Homeowners 202 169 Florida Homeowners 13 8 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 June 30, 2004 December 31, 2003 (unaudited) Investments - available for sale Fixed maturities at market (amortized cost $2,118,544 in 2004 and $1,856,083 in 2003) $2,164,629 $1,945,309 Equity securities at market (cost $209,805 in 2004 and $223,113 in 2003) 232,227 264,393 Short-term cash investments, at cost, which approximates market 302,534 329,812 Total investments 2,699,390 2,539,514 Net receivables 331,951 299,094 Deferred policy acquisition costs 146,436 132,059 Other assets 160,963 149,099 Total assets $3,338,740 $3,119,766 Loss and loss adjustment expenses $837,145 $797,927 Unearned premiums 727,414 663,004 Other liabilities 326,048 278,618 Notes payable 124,729 124,714 Shareholders' equity 1,323,404 1,255,503 Total liabilities and shareholders' equity $3,338,740 $3,119,766 Common stock - shares outstanding 54,482 54,424 Book value per share $24.29 $23.07 Statutory surplus $1.25 billion $1.17 billion Portfolio duration 3.5 years 3.8 years
SOURCE: Mercury General Corporation
CONTACT: Theodore Stalick, VP/CFO of Mercury General Corporation,
Web site: http://www.mercuryinsurance.com/