Mercury General Corporation Announces Second Quarter Results
Mercury General Corporation (NYSE: MCY) reported today net income of $73.6 million ($1.35 per share-diluted) in the second quarter 2005 compared with $78.1 million ($1.43 per share-diluted) for the same period in 2004. For the first six months of 2005, net income was $134.0 million ($2.45 per share-diluted) compared to net income of $147.0 million ($2.69 per share-diluted) for the same period in 2004. Included in net income are net realized investment gains, net of tax, of $2.3 million ($0.04 per share-diluted) in the second quarter of 2005 compared with net realized investment gains, net of tax, of $7.9 million ($0.14 per share-diluted) for the same period in 2004, and net realized investment gains, net of tax, of $5.0 million ($0.09 per share-diluted) for the first six months of 2005 compared to net realized investment gains, net of tax, of $11.6 million ($0.21 per share-diluted) for the same period in 2004.
Company-wide net premiums written were $729.9 million in the second quarter 2005, a 12.6% increase over second quarter 2004 net premiums written of $648.5 million, and were approximately $1.5 billion for the first six months of 2005, a 14.2% increase over the same period in 2004. California net premiums written were $525.9 million in the second quarter of 2005, an increase of 5.5% over the same period in 2004, and were approximately $1.1 billion for the first six months of 2005, a 5.3% increase over the same period in 2004. Non-California net premiums written were $204.0 million in the second quarter of 2005, a 36.2% increase over the same period in 2004, and were $407.7 million for the first six months of 2005, an increase of 45.6% increase over the same period in 2004. Non-California net premiums written represented 27.9% of the Company's total second quarter net premiums written, up from 23.1% in the second quarter of 2004.
The Company's combined ratio (GAAP basis) was 90.1% in the second quarter and 91.3% for the first six months of 2005 compared with 88.3% and 88.7% for the same periods in 2004. Positive development on prior accident years' loss reserves was approximately $40 million and $25 million, respectively, for the six months ending June 30, 2005 and June 30, 2004.
Net investment income of $30.7 million (after tax $26.6 million) in the second quarter of 2005 increased by 17.1% over the same period in 2004. The after-tax yield on investment income was 3.6% on average assets of $3.0 billion (fixed maturities and equities at cost) for the quarter. This compares with an after tax yield on investment income of 3.6% on average investments of $2.6 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 September 29, 2005 to shareholders of record on September 15, 2005. The Company's book value per share at June 30, 2005 was $28.44.
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 August 8, 2005. The replay telephone numbers are (800) 642-1687 (USA) or (706) 645-9291 (International). The conference ID# is 7791945. 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 and ratios (unaudited) Quarter Ended June 30, Six Months Ended June 30, 2005 2004 2005 2004 Net premiums written $729,875 $648,449 $1,459,705 $1,278,732 Net premiums earned 707,261 620,432 1,391,975 1,212,369 Paid losses and loss adjustment expenses 422,055 348,993 846,727 711,899 Incurred losses and loss adjustment expenses 442,764 380,526 891,010 752,522 Net investment income 30,701 26,212 59,486 51,940 Net realized investment gains, net of tax 2,304 7,876 5,045 11,564 Net income $73,602 $78,134 $134,026 $146,950 Basic average shares outstanding 54,548 54,459 54,542 54,445 Diluted average shares outstanding 54,699 54,628 54,708 54,616 Basic Per Share Data Net income $1.35 $1.43 $2.46 $2.70 Net realized investment gains, net of tax $0.04 $0.14 $0.09 $0.21 Net income $1.35 $1.43 $2.45 $2.69 Net realized investment gains, net of tax $0.04 $0.14 $0.09 $0.21 Operating Ratios -- GAAP (a) Basis Loss ratio 62.6% 61.3% 64.0% 62.1% Expense ratio 27.5% 27.0% 27.3% 26.6% Combined ratio 90.1% 88.3% 91.3% 88.7% Reconciliations of Operating Measures to Comparable GAAP (a) Measures Net premiums written $729,875 $648,449 $1,459,705 $1,278,732 Increase in unearned premiums (22,614) (28,017) (67,730) (66,363) Net premiums earned $707,261 $620,432 $1,391,975 $1,212,369 Paid losses and loss adjustment expenses $422,055 $348,993 $846,727 $711,899 Increase in net losses and loss adjustment expense reserves 20,709 31,533 44,283 40,623 Incurred losses and loss adjustment expenses $442,764 $380,526 $891,010 $752,522 (a) Generally Accepted Accounting Principles Mercury General Corporation and Subsidiaries Other Supplemental Information (000's) except ratios (unaudited) Quarter ending, Six Months Ending, June 30, June 30, 2005 2004 2005 2004 Total California Operations (1) Net Premiums Written $525,910 $498,697 $1,051,990 $998,795 Net Premiums Earned 517,345 495,137 1,022,661 979,919 Loss Ratio 61.5% 60.7% 63.6% 62.0% Expense Ratio 25.6% 26.0% 25.7% 25.9% Combined Ratio 87.1% 86.7% 89.3% 87.9% California Automobile lines Net Premiums Written $470,069 $450,959 $950,713 $912,952 Net Premiums Earned 469,909 454,548 930,478 902,344 Loss Ratio 62.9% 62.7% 64.0% 63.7% Expense Ratio 25.6% 26.1% 25.6% 25.9% Combined Ratio 88.5% 88.8% 89.6% 89.6% California Homeowners line Net Premiums Written $46,180 $39,725 $83,403 $71,751 Net Premiums Earned 38,997 33,375 76,333 64,843 Loss Ratio 47.9% 35.7% 60.4% 41.4% Expense Ratio 23.9% 24.5% 24.3% 25.1% Combined Ratio 71.8% 60.2% 84.7% 66.5% Non-California Operations (2) Net Premiums Written $203,965 $149,752 $407,715 $279,937 Net Premiums Earned 189,916 125,295 369,314 232,450 Loss Ratio 65.7% 64.0% 65.1% 62.1% Expense Ratio 32.7% 30.6% 32.0% 29.8% Combined Ratio 98.4% 94.6% 97.1% 91.9% At June 30, Policies-in-force (000's) 2005 2004 California Personal Auto 1,093 1,048 California Commercial Auto 21 21 Non-California Personal Auto 368 252 California Homeowners 228 202 Florida Homeowners 15 13 All ratios are calculated on GAAP basis. (1) 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, 2005 December 31, 2004 (unaudited) Investments -- available for sale Fixed maturities at market (amortized cost $2,335,149 in 2005 and $2,164,955 in 2004) $2,411,489 $2,245,311 Equity securities at market (cost $206,698 in 2005 and $210,553 in 2004) 259,637 254,362 Short-term cash investments, at cost, which approximates market 443,784 421,369 Total investments 3,114,910 2,921,042 Net receivables 365,096 367,662 Deferred policy acquisition costs 189,998 174,840 Other assets 183,915 146,199 Total assets $3,853,919 $3,609,743 Loss and loss adjustment expenses $940,491 $900,744 Unearned premiums 867,450 799,679 Other liabilities 358,521 325,029 Notes payable 136,008 124,743 Shareholders' equity 1,551,449 1,459,548 Total liabilities and shareholders' equity $3,853,919 $3,609,743 Common stock -- shares outstanding 54,561 54,515 Book value per share $28.44 $26.77 Statutory surplus $1.43 billion $1.36 billion Portfolio duration 2.9 years 3.2 years
SOURCE: Mercury General Corporation
CONTACT: Theodore Stalick, VP/CFO of Mercury General Corporation,
Web site: http://www.mercuryinsurance.com/