Mercury General Corporation (NYSE: MCY), a major California automobile insurer with operations in a number of other states, reported today that net operating earnings in the third quarter of 2000 were $27.0 million, or $.50 per share (diluted), compared with $32.1 million, or $.59 per share (diluted) in 1999. For the full nine months, net operating earnings were $81.6 million, or $1.50 per share (diluted), compared with $106.0 million, or $1.93 per share (diluted) in 1999. Per share net income (diluted), including net realized investment gains and losses, was $.51 for the third quarter and $1.54 for the full nine months, compared with $.51 and $1.84, respectively, in 1999.
Company-wide premiums written in the third quarter were $320.5 million, a 4.4% increase over 1999. California premiums written in the quarter were $283.6 million, a 1.6% increase over 1999.
The loss ratio (GAAP basis) was 71.9% in the third quarter and 71.3% for the full nine months, compared to 68.5% and 66.2%, respectively, in 1999. The higher loss ratio in the quarter, as compared to the third quarter of 1999, was largely due to an increase in recorded severity on California automobile claims partially offset by an improvement in the Company's operations outside of California.
The expense ratio (GAAP basis) was 26.2% in the third quarter and 26.8% for the full nine months, compared to 26.4% and 26.9%, respectively, in 1999.
The Company had an underwriting loss of $3.2 million in the quarter from its operations outside of California compared to an underwriting loss of $5.0 million in the third quarter of 1999. The third quarter underwriting loss was principally attributable to a $2.6 million loss in the Company's new operations in Texas. The Company had better loss experience and lower underwriting expenses at American Mercury Insurance Group and at the Company's Florida operations.
Investment income in the quarter increased 8.2% to $26.9 million. After taxes at an effective rate of 10.4% versus 10.2% in 1999, per share (diluted) investment income was $.44 in the third quarter, compared with $.41 in 1999. The after-tax yield on average investments of $1.7 billion (fixed maturities and equities at cost) was approximately 5.56% for the quarter, compared with 5.62% for all of 1999.
Realized investment gains totaled $0.6 million in the third quarter compared to a realized investment loss of $6.8 million in the third quarter of 1999. The large realized loss in 1999 was primarily due to a $6.0 million write down of a permanently impaired preferred stock holding.
On October 27, 2000, the Board of Directors declared a second quarter dividend of $.24 per share to be paid on December 28, 2000 to holders of record on December 14, 2000. The Company's book value per share at September 30, 2000 was $18.22 per share.
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 no limited to the following risks and uncertainties: changes in the demand for the Company's insurance products, and in general economic conditions; 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.
SUMMARY OF OPERATING RESULTS (000) Quarter Ended September 30, 2000 1999 Net Premiums Written $320,516 $307,062 Net Premiums Earned 315,108 300,070 Paid Losses and Loss Adjustment Expenses 209,173 188,775 Incurred Losses 226,706 205,412 Net Investment Income 26,865 24,834 Net Operating Income (a) 27,015 32,113 Capital Gains (Losses), net of tax 406 (4,417) Net Income $27,421 $27,696 Basic Average Shares Outstanding 54,074,298 54,633,375 Diluted Average Shares Outstanding 54,223,764 54,818,300 Basic Per Share Data Earnings Per Share $0.51 $0.51 Diluted Per Share Data (b) Net Operating Income $0.50 $0.59 Capital Gains (Losses), net of tax $0.01 ($0.08) Earnings Per Share $0.51 $0.51 Operating Ratios--GAAP Basis (c) Loss Ratio 71.9% 68.5% Expense Ratio 26.2% 26.4% Combined Ratio 98.1% 94.9% Nine Months Ended September 30, 2000 1999 Net Premiums Written $956,111 $907,802 Net Premiums Earned 931,950 886,522 Paid Losses and Loss Adjustment Expenses 634,132 561,857 Incurred Losses 664,609 586,523 Net Investment Income 78,536 73,942 Net Operating Income (a) 81,551 106,024 Capital Gains (Losses), net of tax 1,810 (5,323) Net Income $83,361 $100,701 Basic Average Shares Outstanding 54,098,916 54,615,320 Diluted Average Shares Outstanding 54,230,720 54,833,838 Basic Per Share Data Earnings Per Share $1.54 $1.84 Diluted Per Share Data (b) Net Operating Income $1.50 $1.93 Capital Gains (Losses), net of tax $0.03 ($0.10) Earnings Per Share $1.54 $1.84 Operating Ratios--GAAP Basis (c) Loss Ratio 71.3% 66.2% Expense Ratio 26.8% 26.9% Combined Ratio 98.1% 93.1% (a) Net Income, excluding capital gains, net of tax. (b) Numbers may not sum due to rounding differences (c) Generally Accepted Accounting Principles
SOURCE: Mercury General Corporation
Contact: Gabriel Tirador, CFO of Mercury General Corporation,
323-937-1060, fax, 323-857-7116
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800-758-5804, ext. 554587