Mercury General Corporation Announces First Quarter Results
Mercury General Corporation (NYSE: MCY) reported today net income of $60.4 million, or $1.10 per share (diluted), in the first quarter 2005 compared with $68.8 million, or $1.26 per share (diluted), in the same period for 2004. Included in net income are net realized investment gains, net of tax, of $2.7 million, or $0.05 per share (diluted), in the first quarter of 2005 compared with net realized investment gains, net of tax, of $3.7 million, or $0.07 per share (diluted), for the same period in 2004.
Company-wide net premiums written were $729.8 million in the first quarter 2005, a 15.8% increase over first quarter 2004 net premiums written of $630.3 million. California net premiums written were $526.1 million in the quarter, an increase of 5.2% over 2004. Non-California net premiums written were $203.8 million in the quarter, a 56.5% increase over 2004. Non-California net premiums written represented 27.9% of the Company's total first quarter net premiums written, up from 20.7% in the first quarter of 2004.
The Company's combined ratio (GAAP basis) was 92.6% in the first quarter of 2005 compared with 89.1% in the same period for 2004. During the first quarter of 2005, the loss ratio was negatively impacted by increased loss frequency, particularly in the homeowners line of business, caused by near record rainfall in the state of California. Positive development on prior period loss reserves was approximately $20 million and $15 million, respectively, for the periods ending March 31, 2005 and March 31, 2004.
Net investment income of $28.8 million (after tax $25.0 million) in the first quarter of 2005 increased by 12% over the same period in 2004. The after-tax yield on investment income was 3.4% on average assets of $2.9 billion (fixed maturities and equities at cost) for the quarter. This compares with an after tax yield on investment income of 3.7% on average investments of $2.5 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 June 30, 2005 to shareholders of record on June 15, 2005. The Company's book value per share at March 31, 2005 was $27.21.
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 May 9, 2005. The replay telephone numbers are (800) 642-1687 (USA) or (706) 645-9291 (International). The conference ID# is 5582558. 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 (unaudited) Quarter Ended March 31, 2005 2004 Net premiums written $729,830 $630,283 Net premiums earned 684,714 591,937 Paid losses and loss adjustment expenses 424,672 362,906 Incurred losses and loss adjustment expenses 448,246 371,996 Net investment income 28,785 25,728 Net realized investment gains, net of tax 2,740 3,688 Net income $60,424 $68,816 Basic average shares outstanding 54,535 54,430 Diluted average shares outstanding 54,717 54,607 Basic Per Share Data Net income $1.11 $1.26 Net realized investment gains, net of tax $0.05 $0.07 Diluted Per Share Data Net income $1.10 $1.26 Net realized investment gains, net of tax $0.05 $0.07 Operating Ratios--GAAP (a) Basis Loss ratio 65.5% 62.8% Expense ratio 27.1% 26.3% Combined ratio 92.6% 89.1% Reconciliations of Operating Measures to Comparable GAAP (a) Measures Net premiums written $729,830 $630,283 Increase in unearned premiums (45,116) (38,346) Net premiums earned $684,714 $591,937 Paid losses and loss adjustment expenses $424,672 $362,906 Increase in net losses and loss adjustment expense reserves 23,574 9,090 Incurred losses and loss adjustment expenses $448,246 $371,996 (a) Generally Accepted Accounting Principles Mercury General Corporation and Subsidiaries Other Supplemental Information (000's) except ratios (unaudited) Quarter ending, March 31, 2005 2004 Total California Operations (1) Net Premiums Written $526,079 $500,098 Net Premiums Earned 505,316 484,782 Loss Ratio 65.8% 63.5% Expense Ratio 25.6% 25.7% Combined Ratio 91.4% 89.2% California Automobile lines Net Premiums Written $480,644 $461,993 Net Premiums Earned 460,569 447,796 Loss Ratio 65.1% 64.7% Expense Ratio 25.6% 25.6% Combined Ratio 90.7% 90.3% California Homeowners line Net Premiums Written $37,223 $32,026 Net Premiums Earned 37,336 31,468 Loss Ratio 73.4% 47.4% Expense Ratio 24.9% 25.8% Combined Ratio 98.3% 73.2% Non-California Operations (2) Net Premiums Written $203,751 $130,185 Net Premiums Earned 179,398 107,155 Loss Ratio 64.4% 60.0% Expense Ratio 31.4% 28.8% Combined Ratio 95.8% 88.8% At At Policies-in-force (000's) March 31, 2005 March 31, 2004 California Personal Auto 1,081 1,041 California Commercial Auto 21 21 Non-California Personal Auto 353 216 California Homeowners 221 196 Florida Homeowners 16 11 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, 2005 December 31, 2004 (unaudited) Investments - available for sale Fixed maturities at market (amortized cost $2,269,598 in 2005 and $2,164,955 in 2004) $2,327,639 $2,245,311 Equity securities at market (cost $210,938 in 2005 and $210,553 in 2004) 256,768 254,362 Short-term cash investments, at cost, which approximates market 456,164 421,369 Total investments 3,040,571 2,921,042 Net receivables 360,859 367,662 Deferred policy acquisition costs 183,429 174,840 Other assets 171,290 146,199 Total assets $3,756,149 $3,609,743 Loss and loss adjustment expenses $919,872 $900,744 Unearned premiums 844,828 799,679 Other liabilities 371,279 325,029 Notes payable 136,001 124,743 Shareholders' equity 1,484,169 1,459,548 Total liabilities and shareholders' equity $3,756,149 $3,609,743 Common stock - shares outstanding 54,541 54,515 Book value per share $27.21 $26.77 Statutory surplus $1.39 billion $1.36 billion Portfolio duration 3.0 years 3.2 years
SOURCE: Mercury General Corporation
CONTACT: Theodore Stalick, VP/CFO of Mercury General Corporation,
Web site: http://www.mercuryinsurance.com/