LOS ANGELES, Aug. 3 /PRNewswire-FirstCall/ -- Mercury General
Corporation (NYSE:MCY) reported today for the second quarter of
2009: Consolidated Highlights Three Months Ended June 30, Change
------ 2009 2008 $ % ---- ---- --- --- (000's except per-share
amounts and ratios) Net premiums written (1) $637,405 $684,177
$(46,772) (6.8) Net income $114,447 $70,726 $43,721 61.8 Net income
per diluted share $2.07 $1.29 $0.78 60.5 Operating income (1)
$47,336 $47,004 $332 0.7 Operating income per diluted share (1)
$0.86 $0.86 $- - Positive (adverse) development on prior periods'
loss reserves (2) $31,000 $(9,000) $40,000 - Severance related
expenses (2) $- $- $- - Expense related to amortization of AIS
deferred policy acquisition costs (2) (3) $3,000 NA NA NA Combined
ratio 96.1% 97.0% (0.9) pts - Combined ratio-accident period basis
(1) 100.8% 95.8% 5.0 pts - Six Months Ended June 30, Change ------
2009 2008 $ % ---- ---- --- --- (000's except per-share amounts and
ratios) Net premiums written (1) $1,308,297 $1,413,443 $(105,146)
(7.4) Net income $211,100 $66,765 $144,335 216.2 Net income per
diluted share $3.83 $1.22 $2.61 213.9 Operating income (1) $93,335
$102,932 $(9,597) (9.3) Operating income per diluted share (1)
$1.69 $1.88 $(0.19) (10.1) Positive (adverse) development on prior
periods' loss reserves (2) $38,000 $(17,000) $55,000 - Severance
related expenses (2) $8,000 $- $8,000 - Expense related to
amortization of AIS deferred policy acquisition costs (2) (3)
$15,000 NA NA NA Combined ratio 96.5% 96.2% 0.3 pts - Combined
ratio-accident period basis (1) 99.4% 95.1% 4.3 pts - (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) The amounts are estimated and rounded to the
nearest million. (3) Represents the net expense related to Auto
Insurance Specialists, LLC ("AIS") deferred commissions at December
31, 2008 amortized in 2009 partially offset by deferred costs
related to policy sales made by AIS in 2009. The Company expects no
material impact after the second quarter of 2009. (NA) Not
applicable Net income in the second quarter 2009 was $114.4 million
($2.07 per share-diluted) compared with net income of $70.7 million
($1.29 per share-diluted) for the same period in 2008. For the
first six months of 2009, net income was $211.1 million ($3.83 per
share-diluted) compared with net income of $66.8 million ($1.22 per
share-diluted) for the same period in 2008. Included in net income
are net realized investment gains, net of tax, of $67.1 million
($1.21 per share-diluted) in the second quarter of 2009 compared
with net realized investment gains, net of tax, of $23.7 million
($0.43 per share-diluted) for the same period in 2008, and net
realized investment gains, net of tax, of $117.8 million ($2.14 per
share-diluted) for the first six months of 2009 compared with net
realized investment losses, net of tax, of $36.2 million ($0.66 per
share) for the same period in 2008. Operating income was $47.3
million ($0.86 per share-diluted) for the second quarter of 2009, a
0.7% increase over the same period in 2008, and $93.3 million
($1.69 per share-diluted) for the first six months of 2009, a 9.3%
decrease over the same period in 2008. As a result of the adoption
of SFAS No. 159, "The Fair Value Option for Financial Assets and
Financial Liabilities" ("SFAS No. 159"), changes in unrealized
gains and losses on all investments that prior to such adoption
were recorded as changes to accumulated other comprehensive income
on the balance sheet are now recorded as realized gains and losses
on the statement of operations. Net realized investment gains, net
of tax, of $67.1 million for the second quarter of 2009 and $117.8
million for the first six months of 2009 include gains, net of tax,
of $80.4 million and $139.3 million, respectively, in accordance
with SFAS No. 159. Partially offsetting the gains were $15.9
million and $24.6 million in losses, net of tax, from the sale of
securities during the second quarter and during the first six
months of 2009, respectively. Company-wide net premiums written
were $637.4 million in the second quarter of 2009, a 6.8% decrease
over the second quarter 2008 net premiums written of $684.2
million, and were approximately $1.3 billion for the first six
months of 2009, a 7.4% decrease over the same period in 2008. Net
investment income of $36.2 million (after tax $32.6 million) in the
second quarter of 2009 decreased by 7.1% over the same period in
2008. The after-tax yield on investment income was 4.1% on average
investments of $3.2 billion (fixed maturities, equities and
short-term investments at cost) for the second quarter. This
compares with an after-tax yield on investment income of 4.0% on
average investments of $3.5 billion (fixed maturities, equities and
short-term investments at cost) for the same period in 2008. Net
investment income for the first six months of 2009 was $74.1
million (after tax $66.0 million), a decrease of 5.3% over the same
period in 2008. The after-tax yield on investment income was 4.1%
on average assets of $3.2 billion (fixed maturities, equities and
short-term investments at cost) for the first six months of 2009.
This compares with an after-tax yield on investment income of 4.0%
on average investments of $3.5 billion (fixed maturities, equities
and short-term investments at cost) for the same period in 2008.
The Board of Directors declared a quarterly dividend of $0.58 per
share. The dividend is to be paid on September 30, 2009 to
shareholders of record on September 16, 2009. 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
http://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
http://www.mercuryinsurance.com/. A replay of the call will be
available beginning at 1:30 P.M. Pacific time and running through
August 9, 2009. The replay telephone numbers are (800) 642-1687
(USA) or (706) 645-9291 (International). The conference ID# is
20297214. 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 in general economic
conditions, including the impact of current economic conditions on
the Company's market and investment portfolio; the accuracy and
adequacy of the Company's pricing methodologies; adverse weather
conditions or natural disasters in the markets served by the
Company; general 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; 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 managing its
business in states outside of California; the Company's ability to
successfully complete its initiative to standardize its policies
and procedures nationwide in all of its functional areas; 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.
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 U.S. generally accepted
accounting principles. 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 net effect of 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 excludes the effect of items that
tend to be highly variable from period to period and highlights the
results from ongoing operations and the underlying profitability of
the Company's core insurance business. Therefore, the Company
believes that it is useful for investors to evaluate net income and
operating income separately when reviewing and evaluating its
performance. Operating income is meant as supplemental information
and it should not be considered as a substitute for net income and
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 June
30, Total Per diluted share ----- ----------------- 2009 2008 2009
2008 ---- ---- ---- ---- (000's except per- share amounts)
Operating income $47,336 $47,004 $0.86 $0.86 Net realized
investment gains (losses), net of tax 67,111 23,722 1.21 0.43
------ ------ ---- ---- Net income $114,447 $70,726 $2.07 $1.29
======== ======= ===== ===== Six Months Ended June 30, Total Per
diluted share (1) ----- --------------------- 2009 2008 2009 2008
---- ---- ---- ---- (000's except per- share amounts) Operating
income $93,335 $102,932 $1.69 $1.88 Net realized investment gains
(losses), net of tax 117,765 (36,167) 2.14 (0.66) ------- -------
---- ----- Net income $211,100 $66,765 $3.83 $1.22 ======== =======
===== ===== (1) The dilutive impact of incremental shares is
excluded from loss positions in 2008 in accordance with GAAP. 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. 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 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. 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 business 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 Six Months Ended June 30, June 30, 2009
2008 2009 2008 ---- ---- ---- ---- Combined ratio-accident period
basis 100.8% 95.8% 99.4% 95.1% Effect of estimated prior periods'
loss development -4.7% 1.2% -2.9% 1.1% ---- --- ---- ---- Combined
ratio 96.1% 97.0% 96.5% 96.2% ===== ===== ===== ===== Mercury
General Corporation and Subsidiaries Summary of Operating Results
(000's except per-share amounts and ratios) (unaudited) Quarter
Ended Six Months Ended June 30, June 30, 2009 2008 2009 2008 ----
---- ---- ---- Net premiums written $637,405 $684,177 $1,308,297
$1,413,443 Net premiums earned 659,211 711,204 1,325,274 1,432,120
Paid losses and loss adjustment expenses 467,333 511,322 952,799
1,056,254 Incurred losses and loss adjustment expenses 445,463
489,545 889,755 973,018 Net investment income 36,212 38,995 74,126
78,294 Net realized investment gains (losses), net of tax 67,111
23,722 117,765 (36,167) Net income $114,447 $70,726 $211,100
$66,765 ======== ======= ======== ======= Basic average shares
outstanding 54,770 54,734 54,769 54,732 Diluted average shares
outstanding 55,320 54,997 55,166 54,895 Basic Per Share Data
-------------------- Net income $2.09 $1.29 $3.85 $1.22 ===== =====
===== ===== Net realized investment gains (losses), net of tax
$1.23 $0.43 $2.15 $(0.66) ===== ===== ===== ====== Diluted Per
Share Data ---------------------- Net income $2.07 $1.29 $3.83
$1.22 ===== ===== ===== ===== Net realized investment gains
(losses), net of tax (a) $1.21 $0.43 $2.14 $(0.66) ===== =====
===== ====== Operating Ratios-GAAP Basis
--------------------------- Loss ratio 67.6% 68.8% 67.2% 67.9%
Expense ratio 28.5% 28.2% 29.3% 28.3% ---- ---- ---- ---- Combined
ratio 96.1% 97.0% 96.5% 96.2% ==== ==== ==== ==== Reconciliations
of Operating Measures to Comparable GAAP Measures
------------------------------------------------------------------
Net premiums written $637,405 $684,177 $1,308,297 $1,413,443
Increase in unearned premiums 21,806 27,027 16,977 18,677 ------
------ ------ ------ Net premiums earned $659,211 $711,204
$1,325,274 $1,432,120 ======== ======== ========== ========== Paid
losses and loss adjustment expenses $467,333 $511,322 $952,799
$1,056,254 Decrease in net loss and loss adjustment expense
reserves (21,870) (21,777) (63,044) (83,236) ------- -------
------- ------- Incurred losses and loss adjustment expenses
$445,463 $489,545 $889,755 $973,018 ======== ======== ========
======== (a) The dilutive impact of incremental shares in 2008 is
excluded from loss positions in accordance with GAAP Mercury
General Corporation and Subsidiaries Condensed Balance Sheets and
Other Information (000's except per-share amounts and ratios)
(unaudited) June 30, 2009 December 31, 2008 -------------
----------------- Investments: Fixed maturities trading, at fair
value (amortized cost $2,724,175; $2,728,471) $2,624,812 $2,481,673
Equity securities trading, at fair value (cost $348,285; $403,773)
258,813 247,391 Short-term investments, at fair value (amortized
cost $94,574; $208,278) 94,557 204,756 ------ ------- Total
investments 2,978,182 2,933,820 Net receivables 328,391 339,992
Deferred policy acquisition costs 181,132 200,005 Other assets
654,166 476,378 ------- ------- Total assets $4,141,871 $3,950,195
========== ========== Losses and loss adjustment expenses
$1,070,003 $1,133,508 Unearned premiums 862,706 879,651 Notes
payable 273,426 158,625 Other liabilities 293,190 284,360
Shareholders' equity 1,642,546 1,494,051 --------- --------- Total
liabilities and shareholders' equity $4,141,871 $3,950,195
========== ========== Common stock-shares outstanding 54,770 54,764
Book value per share $29.99 $27.28 Estimated statutory surplus $1.4
billion $1.4 billion Estimated premiums written to surplus ratio
1.9 2.0 Debt to total capital ratio 14.3% 9.6% Portfolio duration
6.1 years 6.5 years Policies-in-Force (Companywide "PIF") Personal
Auto PIF 1,304 1,321 Homeowners PIF 315 303 DATASOURCE: Mercury
General Corporation CONTACT: Theodore Stalick, VP/CFO of Mercury
General Corporation, +1-323-937-1060 Web Site:
http://www.mercuryinsurance.com/
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