Mercer Insurance Group, Inc. (NASDAQ: MIGP) reported today its
operating results for the six months and quarter ended June 30,
2010.
2nd Quarter highlights:
-- Net income of $0.59 per diluted share versus $0.60 per diluted share in
the prior year's quarter,
-- Operating income of $0.52 per diluted share versus $0.55 per diluted
share in the prior year's quarter,
-- A GAAP combined ratio of 97.0% versus 97.4% in the prior year's
quarter, and
-- Book value per diluted share of $27.26.
Andrew R. Speaker, President and CEO, noted, "We are pleased
that we have produced consistent overall operating results while
facing a difficult market. The prolonged economic recovery, a price
sensitive market-place, and diminishing investment yields have
placed pressure on our results, and those of the entire property
and casualty insurance industry. It is through a disciplined
approach to our business that we continue to achieve our steady
results."
Speaker continued, "Book value increased to $27.26 per share.
One of our primary goals is the steady growth of book value, as it
not only supports our credit ratings but positions us for
improvements in the competitive environment.
"Our direct writings fell by 5.9% for the quarter, and by 2.3%
year-to-date. The decrease has resulted from the combination of
continuing competition for business in the marketplace, and the
weakness in the economy which, particularly in residential
construction, has led to reduced exposures to insure. Many
competitors are writing insurance at what we believe are
undisciplined pricing levels which we are unwilling to match. At
the same time, we have successfully introduced a number of new
products in our markets. In our West Coast operations, we have
introduced with success a product geared at the smaller service
contractor. In our East Coast markets we have successfully
introduced a waste haulers product and a garage product. Although
we are dissatisfied with the overall decline in direct writings, we
are pleased these new initiatives are being well received in the
marketplace and confident that our disciplined underwriting will
lead to satisfactory results."
Financial Summary (in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
(unaudited) (unaudited)
------------------ ------------------
2010 2009 2010 2009
-------- -------- -------- --------
Total revenue $ 38,016 $ 39,530 $ 77,185 $ 78,722
Net premiums written 37,524 40,326 69,524 72,182
Net premiums earned 33,379 34,952 68,114 70,534
Net investment income 3,499 3,625 7,005 7,228
Net realized gains (losses) on
investments 618 402 1,090 (79)
Net income 3,780 3,750 7,252 6,641
Earnings per share - Basic $ 0.60 $ 0.61 $ 1.16 $ 1.07
Earnings per share - Diluted $ 0.59 $ 0.60 $ 1.13 $ 1.06
Combined ratio 97.0% 97.4% 97.6% 97.9%
Book value per share $ 27.26 $ 23.87
Reconciliation of non-GAAP
financial measures:
Net income $ 3,780 $ 3,750 $ 7,252 $ 6,641
Net realized gains (losses) on
investments, net of tax 408 266 719 (52)
Net operating income 3,372 3,484 6,533 6,693
Operating earnings per share -
Basic $ 0.54 $ 0.56 $ 1.04 $ 1.08
Operating earnings per share -
Diluted $ 0.52 $ 0.55 $ 1.02 $ 1.07
In the quarter ended June 30, 2010, the Company reported GAAP
net income under U.S. generally accepted accounting principles
(GAAP) of $3.8 million, or $0.59 per diluted share, which
approximates earnings of the prior year's quarter which were $0.60
per diluted share. Operating earnings decreased to $3.4 million
from the $3.5 million reported in the prior year's quarter. The
second quarter included after tax development of $0.7 million
relating to losses resulting from catastrophes 94 and 96, which
occurred in the first quarter of 2010.
In the six months ended June 30, 2010, the Company reported GAAP
net income of $7.3 million, or $1.13 per diluted share. This result
compares to net income of $6.6 million, or $1.06 per diluted share,
for the same period in the previous year. Operating earnings
decreased to $6.5 million from $6.7 million in the prior year.
Included in the six-month results was an after tax charge of $1.5
million for catastrophes 94 and 96.
The Mercer Insurance Group, Inc. Board of Directors also
announced that it has approved a dividend of $0.10 per share, to be
paid on September 27, 2010 to shareholders of record as of
September 10, 2010.
Operating income and operating earnings per share are non-GAAP
financial measures that we present because we believe they enhance
an investor's understanding of Mercer's core operating performance.
Operating income and operating earnings per share consist of net
earnings adjusted for after-tax net realized investment gains and
losses.
Mercer Insurance Group, Inc. offers commercial and personal
lines of insurance to businesses and individuals principally in
seven states through its insurance subsidiaries: Mercer Insurance
Company, Mercer Insurance Company of New Jersey, Inc., Financial
Pacific Insurance Company and Franklin Insurance Company.
Certain of the statements in this press release (other than
statements of historical facts) are forward-looking statements.
Such forward-looking statements include estimates and assumptions
related to economic, competitive and legislative developments.
These forward-looking statements are subject to change and
uncertainty that are, in many instances, beyond the Company's
control and have been made based upon management's expectations and
beliefs concerning future developments and their potential effect
on Mercer Insurance Group, Inc. There can be no assurance that
future developments will be in accordance with management's
expectations. Therefore the effect of future developments on Mercer
Insurance Group, Inc. may be different from that anticipated by
management. Actual financial results including premium growth and
underwriting results could differ materially from those anticipated
by Mercer Insurance Group, Inc. depending on the outcome of certain
factors, which may include changes in property and casualty loss
trends and reserves; catastrophe losses; the insurance product
pricing environment; changes in applicable law; government
regulation and changes therein, including those that may impede the
ability to charge adequate rates; changes in accounting principles;
performance of the financial markets; fluctuations in interest
rates; availability and price of reinsurance; and the status of the
labor markets in which the company operates.
Consolidated Statements of Income
(in thousands, except per share and share data)
Quarter Ended
June 30,
2010 2009
(unaudited) (unaudited)
Net premiums earned $ 33,379 $ 34,952
Investment income,
net of investment expenses 3,499 3,625
Realized investment gains 618 402
Other revenue 520 551
Total revenue 38,016 39,530
Losses and loss adjustment expenses 20,754 20,761
Amortization of deferred policy
acquisition costs 9,048 9,598
Other expenses 2,584 3,678
Interest expense 353 356
Total expenses 32,739 34,393
Income before income taxes 5,277 5,137
Income taxes 1,497 1,387
Net income $ 3,780 $ 3,750
Net income per common share:
Basic $ 0.60 $ 0.61
Diluted $ 0.59 $ 0.60
Weighted average number of
shares outstanding:
Basic 6,284,892 6,196,311
Diluted 6,436,567 6,298,438
Supplementary Financial Data
Net written premiums $ 37,524 $ 40,326
Book value per common share $ 27.26 $ 23.87
GAAP combined ratio 97.0% 97.4%
Consolidated Statements of Income
(in thousands, except per share and share data)
Six Months Ended
June 30,
2010 2009
(unaudited) (unaudited)
Net premiums earned $ 68,114 $ 70,534
Investment income,
net of investment expenses 7,005 7,228
Realized investment gains (losses) 1,090 (79)
Other revenue 976 1,039
Total revenue 77,185 78,722
Losses and loss adjustment expenses 42,667 42,960
Amortization of deferred policy
acquisition costs 18,433 19,503
Other expenses 5,348 6,569
Interest expense 704 708
Total expenses 67,152 69,740
Income before income taxes 10,033 8,982
Income taxes 2,781 2,341
Net income $ 7,252 $ 6,641
Net income per common share:
Basic $ 1.16 $ 1.07
Diluted $ 1.13 $ 1.06
Weighted average number of
shares outstanding:
Basic 6,272,131 6,188,313
Diluted 6,424,958 6,262,612
Supplementary Financial Data
Net written premiums $ 69,524 $ 72,182
GAAP combined ratio 97.6% 97.9%
Consolidated Balance Sheet
(in thousands, except share amounts)
June 30,
2010 December 31,
(unaudited) 2009
ASSETS
Investments, at fair value:
Fixed income securities, available-for sale $ 389,012 $ 365,464
Equity securities, at fair value 8,402 9,484
Short-term investments, at cost, which
approximates fair value 12,999 -
Total investments 410,413 374,948
Cash and cash equivalents 16,461 39,927
Premiums receivable 42,472 36,405
Reinsurance receivable 74,780 79,599
Prepaid reinsurance premiums 6,537 5,871
Deferred policy acquisition costs 19,066 18,876
Accrued investment income 4,271 4,287
Property and equipment, net 20,733 21,516
Deferred income taxes 2,844 4,941
Goodwill 5,416 5,416
Other assets 4,448 3,568
Total assets $ 607,441 $ 595,354
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Losses and loss adjustment expenses $ 309,167 $ 311,348
Unearned premiums 78,676 76,601
Accounts payable and accrued expenses 9,821 12,150
Other reinsurance balances 14,515 12,386
Trust preferred securities 15,601 15,592
Advances under line of credit 3,000 3,000
Other liabilities 5,013 4,069
Total liabilities $ 435,793 $ 435,146
Stockholders' Equity:
Preferred Stock, no par value, authorized
5,000,000 shares, no shares issued and
outstanding - -
Common stock, no par value,
authorized 15,000,000 shares, issued
7,086,833 and 7,074,333 shares, outstanding
6,928,046 and 6,883,498 shares - -
Additional paid-in capital $ 72,603 $ 72,139
Accumulated other comprehensive income 16,735 12,220
Retained earnings 92,257 86,101
Unearned ESOP shares (1,568) (1,878)
Treasury Stock, 632,391 and 632,076 shares (8,379) (8,374)
Total stockholders' equity 171,648 160,208
Total liabilities and stockholders' equity $ 607,441 $ 595,354
Company Contacts: Andrew R. Speaker President & CEO Mercer
Insurance Group, Inc. (609) 737-0426 David B. Merclean Senior Vice
President & CFO Mercer Insurance Group, Inc. (609) 737-0426
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