Mercury General Corporation (NYSE: MCY), a major California automobile insurer with operations in a number of other states, reported today that net income was $42.1 million, or $0.77 per share (diluted), in the first quarter 2003 compared with $29.0 million, or $0.53 per share (diluted), in the same period for 2002. Net operating earnings in the first quarter of 2003 were $42.6 million, or $0.78 per share, compared with $28.8 million, or $0.53 per share in 2002. The Company defines net operating earnings, a non GAAP financial measure, as net income excluding net realized investment gains and losses, net of tax. Management believes that net operating earnings better reflects the Company's core business results since its investment policy emphasizes maximization of after-tax yields and not achieving realized gains.
Company-wide premiums written were $538.8 million in the first quarter 2003, a 27.8% increase over first quarter 2002 premiums written of $421.5 million. California premiums written were $452.9 million in the quarter, an increase of 25.8% over 2002. The increased premiums were driven by both policy count growth and recent rate increases.
The loss ratio (GAAP basis) was 68.2% in the quarter compared with 71.9% in the same period for 2002. The lower loss ratio is largely attributed to recent rate increases and improved loss frequency in the Company's automobile lines of business. Loss frequencies can be affected by many factors including seasonal travel, weather and fluctuations in gasoline prices.
The expense ratio (GAAP basis) was 26.2% in the quarter compared with 26.6% in the same period for 2002.
The Company received approval from the California Department of Insurance to increase its personal automobile rates by 6.9% in Mercury Casualty Company and California Automobile Insurance Company and 3.8% in Mercury Insurance Company. The Company plans to implement these rate increases in June 2003.
Net investment income in the first quarter of 2003 of $26.9 million decreased by 8.7% from $29.5 million in the same period for 2002. After taxes, per share (diluted) investment income was $0.44 in the quarter, compared with $0.47 in the first quarter of 2002. The after-tax yield was 4.33% on average investments of $2.21 billion (fixed maturities and equities at cost) for the quarter. This compares with 5.23% in the first quarter of 2002.
The Board of Directors declared a second quarter dividend of $0.33 per share, representing a 10% increase over the quarterly dividend amount paid in 2002. The dividend is to be paid on June 30, 2003 to shareholders of record on June 15, 2003. The Company's book value per share at March 31, 2003 was $20.84.
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 March 31, 2003 2002 Net Premiums Written $538,750 $421,501 Net Premiums Earned 500,666 386,637 Paid Losses and Loss Adjustment Expenses 320,599 259,636 Incurred Losses and Loss Adjustment Expenses 341,546 278,101 Net Investment Income 26,926 29,504 Net Realized Investment (Losses) or Gains (a) (493) 155 Net Income $42,108 $28,954 Net Operating Earnings $42,601 $28,799 Basic Average Shares Outstanding 54,378,897 54,265,041 Diluted Average Shares Outstanding 54,489,585 54,462,002 Basic Per Share Data Earnings Per Share $0.77 $0.53 Diluted Per Share Data Net Operating Earnings $0.78 $0.53 Net Realized Investment (Losses) or Gains (a) ($0.01) $0.00 Earnings Per Share $0.77 $0.53 Operating Ratios -- GAAP Basis (b) Loss Ratio 68.2% 71.9% Expense Ratio 26.2% 26.6% Combined Ratio 94.4% 98.5% Reconciliations of Operating Measures to Comparable GAAP (b) Measures Net Premiums Written $538,750 $421,501 Increase in Unearned Premiums (38,084) (34,864) Net Premiums Earned $500,666 $386,637 Paid Losses and Loss Adjustment Expenses $320,599 $259,636 Increase in net losses and loss adjustment expense reserves 20,947 18,465 Incurred Losses and Loss Adjustment Expenses $341,546 $278,101 Net Operating Earnings $42,601 $28,799 Net Realized Investment (Losses) or Gains (a) (493) 155 Net Income, GAAP basis (b) $42,108 $28,954 (a) Net Realized Investment (Losses) or Gains is net of taxes. (b) Generally Accepted Accounting Principles (c) Some numbers may not sum due to rounding MERCURY GENERAL CORPORATION Other Supplemental Information Three months ending March 31, 2003 Net Premiums Loss Expense Combined Written Ratio Ratio Ratio (000's) California $452,946 70.0% 25.6% 95.6% Georgia $4,727 68.1% 31.5% 99.6% Illinois $4,597 53.8% 27.2% 81.0% Florida $33,518 58.7% 25.9% 84.6% Texas (Concord operations) $15,363 58.6% 31.1% 89.7% New York $2,516 79.7% 32.4% 112.1% Virginia $1,873 76.4% 39.0% 115.4% American Mercury operations $23,210 53.6% 33.4% 87.0% Total Company $538,750 68.2% 26.2% 94.4% Three months ending March 31, 2002 Net Premiums Loss Expense Combined Written Ratio Ratio Ratio (000's) California $359,957 71.9% 25.6% 97.5% Georgia $3,727 64.1% 31.6% 95.7% Illinois $3,256 57.4% 28.2% 85.6% Florida $21,837 76.4% 28.3% 104.7% Texas (Concord operations) $9,229 69.6% 34.0% 103.6% New York $800 80.9% 48.3% 129.2% Virginia $551 77.7% 54.9% 132.6% American Mercury operations $22,144 73.4% 37.3% 110.7% Total Company $421,501 71.9% 26.6% 98.5% Policies-in-force at March 31, 2003 amounts in (000's) California Personal Auto (excluding Cal Auto) 897 Personal Auto written through Cal Auto 84 California Commercial Auto 19 California Homeowners 163 Florida Auto 71 Virginia Personal Auto 4 New York Personal Auto 5 Georgia Personal Auto 13 Illinois Personal Auto 12 Texas (Concord Operations) 26 Florida Homeowners 7 Total shareholders' equity at year-end $1.1Billion
SOURCE: Mercury General Corporation
CONTACT: Theodore Stalick, VP/CFO of Mercury General Corporation,
Web site: http://www.mercuryinsurance.com/