2014

Mercury General Corporation Announces First Quarter Results and Declares Quarterly Dividend

LOS ANGELES, April 28, 2014 /PRNewswire/ -- Mercury General Corporation (NYSE: MCY) reported today for the first quarter of 2014:


Consolidated Highlights










Three Months Ended March 31,

Change


2014

2013

$

%

(000's except per-share amounts and ratios)







Net premiums written (1)

$

724,693

$

690,504

$

34,189

5.0

Net income

$

72,649

$

66,461

$

6,188

9.3

Net income per diluted share

$

1.32

$

1.21

$

0.11

9.1

Operating income (1)

$

42,286

$

37,829

$

4,457

11.8

Operating income per diluted share (1)

$

0.77

$

0.69

$

0.08

11.6

Restructuring charges (2)

$

0

$

10,000

$

(10,000)

     NM

Catastrophe losses (3)

$

4,000

$

1,000

$

3,000

     NM

Combined ratio (4)

96.6%

97.9%

(1.3) pts

NM = not meaningful







(1)

These measures are not based on U.S. generally accepted accounting principles ("GAAP") and are defined and reconciled to the most directly comparable GAAP measures in "Information Regarding Non-GAAP Measures."

(2)

In the first quarter of 2013, the Company consolidated its claims and underwriting operations located outside of California into hub locations in Florida, New Jersey, and Texas, which resulted in a net workforce reduction of approximately 135 employees and a $10 million expense. The amounts are rounded to the nearest million.

(3)

2014 catastrophe losses were primarily related to winter freeze events on the East Coast. 2013 catastrophe losses were primarily the result of weather related events in Georgia. The amounts are rounded to the nearest million.

(4)

The Company experienced favorable development of approximately $4 million and $3 million on prior accident years' losses and loss adjustment expenses reserves for the three months ended March 31, 2014 and 2013, respectively. The year-to-date favorable development in 2014 is primarily from California lines of business.




Investment Results




Three Months Ended March 31,


2014

2013

(000's except average annual yield)




Average invested assets at cost (1)

$

3,118,963

$

3,046,982

Net investment income (2)



     Before income taxes

$

30,242

$

31,175

     After income taxes

$

26,960

$

27,271

Average annual yield on investments - after income taxes (2)

3.5%

3.6%



(1)

Fixed maturities and short-term bonds at amortized cost and equities and other short-term investments at cost. Average invested assets at cost are based on the monthly amortized cost of the invested assets for each respective period.

(2)

Net investment income and average annual yield decreased primarily due to the maturity and replacement of higher yielding investments, purchased when market interest rates were higher, with lower yielding investments purchased during low interest rate environments.



 

The Board of Directors declared a quarterly dividend of $0.6150 per share. The dividend will be paid on June 26, 2014 to shareholders of record on June 12, 2014.

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 5, 2014. The replay telephone numbers are (855) 859-2056 (USA) or (404) 537-3406 (International). The conference ID# is 30180482. 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, inflation and general economic conditions, including general market risks associated with the Company's investment portfolio; the accuracy and adequacy of the Company's pricing methodologies; catastrophes in the markets served by the Company; 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; the Company's ability to obtain and the timing of the approval of premium rate changes for insurance policies issued in states where the Company operates; legislation adverse to the automobile insurance industry or business generally that may be enacted in the states where the Company operates; the Company's success in managing its business in non-California states; the presence of competitors with greater financial resources and the impact of competitive pricing and marketing efforts; 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 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 AND SUBSIDIARIES

SUMMARY OF OPERATING RESULTS

(000's except per-share amounts and ratios)

(unaudited)




Three Months Ended March 31,


2014


2013

Net premiums written

$

724,693


$

690,504





Revenues:




     Net premium earned

$

683,701


$

662,595

     Net investment income

30,242


31,175

     Net realized investment gains

46,712


44,050

     Other

2,301


2,333

          Total revenues

$

762,956


$

740,153

Expenses:




     Losses and loss adjustment expenses

476,603


467,060

     Policy acquisition costs

129,814


123,722

     Other operating expenses

54,004


58,063

     Interest

505


314

          Total expenses

$

660,926


$

649,159





Income before income taxes

102,030


90,994

     Income tax expense

29,381


24,533

                    Net income

$

72,649


$

66,461





Basic average shares outstanding

54,977


54,922

Diluted average shares outstanding

54,986


54,935





Basic Per Share Data




Net income

$

1.32


$

1.21

Net realized investment gains, net of tax

$

0.55


$

0.52





Diluted Per Share Data




Net income

$

1.32


$

1.21

Net realized investment gains, net of tax

$

0.55


$

0.52





Operating Ratios-GAAP Basis




Loss ratio

69.7%


70.5%

Expense ratio

26.9%


27.4%

Combined ratio

96.6%


97.9%





Reconciliations of Operating Measures to Comparable GAAP Measures









Net premiums written

$

724,693


$

690,504

Change in net unearned premiums

(40,992)


(27,909)

Net premiums earned

$

683,701


$

662,595





Paid losses and loss adjustment expenses

$

471,491


$

493,480

Change in net loss and loss adjustment expense reserves

5,112


(26,420)

Incurred losses and loss adjustment expenses

$

476,603


$

467,060

 

MERCURY GENERAL CORPORATION AND SUBSIDIARIES

CONDENSED BALANCE SHEETS AND OTHER INFORMATION

(000's except per-share amounts and ratios)


March 31, 2014


December 31, 2013


(unaudited)



ASSETS




Investments, at fair value:




     Fixed maturity securities (amortized cost $2,559,019; $2,523,042)

$

2,633,232


$

2,560,653

     Equity securities (cost $312,850; $223,933)

379,912


281,883

     Short-term investments (cost $303,680; $315,886)

303,560


315,776

          Total investments

3,316,704


3,158,312

Cash

238,832


266,508

Receivables:




     Premiums

392,523


366,075

     Accrued investment income

36,572


36,120

     Other

21,448


23,029

          Total receivables

450,543


425,224

Deferred policy acquisition costs

201,318


194,466

Fixed assets, net

155,954


156,716

Deferred income taxes

0


15,220

Goodwill

42,796


42,796

Other intangible assets, net

40,108


41,603

Other assets

29,864


14,336

          Total assets

$

4,476,119


$

4,315,181





LIABILITIES AND SHAREHOLDERS' EQUITY




Losses and loss adjustment expenses

$

1,044,045


$

1,038,984

Unearned premiums

993,522


953,527

Notes payable

270,000


190,000

Accounts payable and accrued expenses

112,146


127,663

Current income taxes

4,961


11,856

Deferred income taxes

2,318


0

Other liabilities

187,321


170,665

Shareholders' equity

1,861,806


1,822,486

          Total liabilities and shareholders' equity

$

4,476,119


$

4,315,181





OTHER INFORMATION




Common stock shares outstanding

54,978


54,975

Book value per share

$33.86


$33.15

Statutory surplus

$1.56 billion


$1.53 billion

Premiums written to surplus ratio

1.7


1.8

Debt to total capital ratio

12.7%


9.4%

Portfolio duration (including all short-term instruments)(a)(b)

2.8 years


3.6 years

Policies-in-force (company-wide "PIF")(a)




     Personal Auto PIF

1,209


1,217

     Homeowners PIF

466


465



(a)

Unaudited.    

(b)

Modified durations reflecting anticipated early calls.

 

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 GAAP. These measures are not intended to replace, and should be read in conjunction with, the GAAP financial results.

Operating income is net income excluding realized investment gains and losses, net of tax. Net income is the GAAP measure that is most directly comparable to operating income. Operating income is used by management along with the other components of net income to assess the Company's performance. Management uses operating income as an important measure to evaluate the results of the Company's insurance business. Management believes that operating income provides investors with a valuable measure of the Company's ongoing performance as it reveals trends in the Company's insurance business that may be obscured by the effect of net realized capital gains and losses. Realized capital gains and losses may vary significantly between periods and are generally driven by external economic developments such as capital market conditions. Accordingly, operating income highlights the results from ongoing operations and the underlying profitability of the Company's core insurance business. Operating income, which is provided as supplemental information and should not be considered as a substitute for net income, does not reflect the overall profitability of our business. It should be read in conjunction with the GAAP financial results. The Company has reconciled operating income with the most directly comparable GAAP measure in the table below.


Three Months Ended March 31,


Total

Per diluted share


2014

2013

2014

2013

(000's except per-share amounts)





Operating income

$

42,286

$

37,829

$

0.77

$

0.69

Net realized investment gains, net of tax

30,363

28,632

0.55

0.52

Net income

$

72,649

$

66,461

$

1.32

$

1.21

               

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 have been recognized as income in the financial statements for the periods presented as earned on a pro-rata basis over the term of the policies. Net premiums written are meant as supplemental information and are not intended to replace net premiums earned. Such information should be read in conjunction with the GAAP financial results. The Company has reconciled net premiums written with the most directly comparable GAAP measure in the supplemental schedule entitled, "Summary of Operating 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 provided 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. The Company has reconciled paid losses and loss adjustment expenses with the most directly comparable GAAP measure in the supplemental schedule entitled, "Summary of Operating Results."

Combined ratio-accident period basis is computed as the difference between two GAAP operating ratios: the combined ratio and the effect of prior accident periods' loss development. The most directly comparable GAAP measure is the combined ratio. The Company believes that this ratio is useful to investors and it is used by management to reveal the trends in the Company's results of operations that may be obscured by development on prior accident periods' loss reserves. Combined ratio-accident period basis is meant as supplemental information and is not intended to replace combined ratio. It should be read in conjunction with the GAAP financial results. The Company has reconciled combined ratio-accident period basis with the most directly comparable GAAP measure in the table below.



Three Months Ended March 31,


2014


2013





Combined ratio-accident period basis

97.2%


98.4%

Effect of estimated prior periods' loss development

(0.6)%


(0.5)%

Combined ratio

96.6%


97.9%

 

Logo - http://photos.prnewswire.com/prnh/20140414/73019

 

SOURCE Mercury General Corporation



RELATED LINKS
http://www.mercuryinsurance.com

More by this Source


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

 

PR Newswire Membership

Fill out a PR Newswire membership form or contact us at (888) 776-0942.

Learn about PR Newswire services

Request more information about PR Newswire products and services or call us at (888) 776-0942.