Mercury General Corporation Announces Third Quarter Results
Mercury General Corporation (NYSE: MCY), a major California automobile insurer with operations in a number of other states, reported today that net income was $18.5 million, or $0.34 per share (diluted), for the third quarter 2002 compared with $32.1 million, or $0.59 per share (diluted), in the same period for 2001. Net operating earnings for the third quarter of 2002 were $18.5 million, or $0.34 per share, compared with $30.2 million, or $0.56 per share, in 2001. Net operating earnings are defined as net income excluding net realized investment gains and losses. For the first nine months of 2002, net income and net operating earnings were $48.8 million ($0.89 per share), and $80.4 million ($1.47 per share), respectively, which compares to net income and net operating earnings in the same period for 2001 of $83.2 million ($1.53 per share) and $78.6 million ($1.45 per share), respectively.
Company-wide premiums written were $491.6 million in the third quarter, a 31.5% increase over 2001, and $1,360.4 million for the nine-month period, a 27.4% increase over 2001. California premiums written were $418.4 million in the third quarter, a 28.5% increase over 2001, and $1,159.1 million for the nine-month period, a 23.7% increase over 2001. The increased premiums were driven by both policy count growth and higher average premiums.
The loss ratio (GAAP basis) was 76.6% in the third quarter and 73.3% in the first nine months of 2002 compared to 71.3% and 72.5% for the respective periods in 2001. The increase in the loss ratio is primarily due to loss development on prior period reserves caused by loss cost inflation in excess of previous expectations. Loss frequency trends remained flat to slightly favorable for the majority of the Company's lines of business. The Company monitors inflation trends closely for ratemaking purposes.
The expense ratio (GAAP basis) was 25.6% in the third quarter and 26.0% in the first nine months of 2002 compared to 26.2% and 26.5% in the respective periods in 2001. The expense ratio is down slightly due to a reduction of some profitability related expense accruals.
Investment income was $27.8 million for the quarter and $86.4 million for the nine-month period, a 4.2% decrease and 1.6% increase compared to the respective periods in 2001. After taxes, per share (diluted) investment income was $0.46 in the quarter and $1.39 for the nine months, compared with $0.46 and $1.35 for the respective periods in 2001. The after-tax yield was 4.81% on average investments of $2.07 billion (fixed maturities and equities at cost) for the quarter. This compares to 5.38% in the third quarter of 2001.
During the third quarter of 2002, the Company recorded realized gains on investments of less than $0.1 million, net of tax. Included in the realized gains are $2.3 million, net of taxes, of asset write-downs for investments that were considered to be other-than-temporarily impaired.
On October 25, 2002, the Board of Directors declared a quarterly dividend of $0.30 per share. The dividend is to be paid on December 26, 2002 to shareholders of record on December 13, 2002. The Company's book value per share at September 30, 2002 was $20.13 compared to $19.90 at June 30, 2002 and $19.72 at 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; 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 SUMMARY OF OPERATING RESULTS (000) Quarter Ended September 30, 2002 2001 Net Premiums Written $491,602 $373,718 Net Premiums Earned 455,467 351,896 Paid Losses and Loss Adjustment Expenses 288,762 234,778 Incurred Losses 349,046 250,939 Net Investment Income 27,821 29,043 Net Operating Income (a) 18,478 30,245 Capital Gains, net of tax 42 1,810 Net Income $18,520 $32,055 Basic Average Shares Outstanding 54,336,105 54,182,065 Diluted Average Shares Outstanding 54,520,093 54,385,345 Basic Per Share Data Earnings Per Share $0.34 $0.59 Diluted Per Share Data Net Operating Income $0.34 $0.56 Capital Gains, net of tax $0.00 $0.03 Earnings Per Share $0.34 $0.59 Operating Ratios -- GAAP Basis (b) Loss Ratio 76.6% 71.3% Expense Ratio 25.6% 26.2% Combined Ratio 102.2% 97.5% Nine Months Ended September 30, 2002 2001 Net Premiums Written $1,360,449 $1,067,675 Net Premiums Earned 1,260,250 1,013,839 Paid Losses and Loss Adjustment Expenses 819,945 706,002 Incurred Losses 923,715 734,577 Net Investment Income 86,351 85,003 Net Operating Income (a) 80,380 78,628 Capital Gains (Losses), net of tax (31,605) 4,600 Net Income $48,775 $83,228 Basic Average Shares Outstanding 54,302,559 54,167,910 Diluted Average Shares Outstanding 54,506,001 54,363,277 Basic Per Share Data Earnings Per Share $0.90 $1.54 Diluted Per Share Data Net Operating Income $1.47 $1.45 Capital Gains (Losses), net of tax ($0.58) $0.08 Earnings Per Share $0.89 $1.53 Operating Ratios -- GAAP Basis (b) Loss Ratio 73.3% 72.5% Expense Ratio 26.0% 26.5% Combined Ratio 99.3% 99.0% (a) Net Income, excluding capital gains (losses), net of tax. (b) Generally Accepted Accounting Principles
SOURCE: Mercury General Corporation
CONTACT: Theodore Stalick, VP/CFO of Mercury General Corporation,
Web site: http://www.mercuryinsurance.com/