Mercer Insurance Group, Inc. (NASDAQ: MIGP) reported today its
operating results for the nine months and quarter ended September
30, 2010.
3rd Quarter highlights:
-- Net income of $0.60 per diluted share versus $0.56 per
diluted share in the prior year's quarter,
-- Operating income of $0.55 per diluted share versus $0.51
per diluted share in the prior year's quarter,
-- A GAAP combined ratio of 96.0% versus 98.2% in the prior
year's quarter, and
-- Book value per share of $28.49.
Andrew R. Speaker, President and CEO, noted, "We are pleased
with our overall operating results despite the continued
challenging operating environment. The property and casualty
insurance industry, and in particular those companies like us who
are focused on commercial lines of business, continues to face the
dual challenge of a price sensitive market-place and a weak
economy. The disciplined and careful approach we take to
underwriting our business continues to generate steady results in
this difficult market."
Speaker continued, "Book value continued to climb, up 4.5% from
June 30, 2010 to $28.49 per share. Over the past year book value
has increased by $3.00 per share, or 11.8%. The combination of
steady operating performance and a conservative but strong
investment portfolio has led to this increase, and as a result,
shareholders' equity now exceeds $180 million."
"Direct writings continue to be under pressure from the economy
and the market-place, falling 6.0% for the quarter and 4.4%
year-to-date. Despite industry-wide deterioration in combined
ratios and weakening premium volumes, a significant increase in
overall industry capital over the last several years has prolonged
the intense price competition in the marketplace. In order to
respond to these difficult market conditions, we have successfully
introduced new products in our markets, and we see continued growth
in our West Coast product geared at the smaller service contractor,
and our East Coast waste haulers and garage products continue to
gain traction. We will continue to focus on these and future
opportunities."
"The combined ratio for the quarter was 96.0% as we were free of
the weather related losses experienced earlier in the year. This
has helped drive the year to date combined ratio down to
97.0%."
Financial Summary (in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
(unaudited) (unaudited)
------------------ --------------------
2010 2009 2010 2009
-------- -------- --------- ---------
Total revenue $ 38,130 $ 39,274 $ 115,315 $ 117,996
Net premiums written 31,365 33,355 100,889 105,537
Net premiums earned 33,714 34,681 101,828 105,215
Net investment income 3,428 3,605 10,433 10,833
Net realized gains on investments 486 472 1,576 393
Net income 3,866 3,554 11,118 10,195
Earnings per share - Basic $ 0.61 $ 0.57 $ 1.77 $ 1.64
Earnings per share - Diluted $ 0.60 $ 0.56 $ 1.73 $ 1.61
Combined ratio 96.0% 98.2% 97.0% 98.0%
Book value per share $ 28.49 $ 25.49
Reconciliation of non-GAAP
financial measures:
Net income $ 3,866 $ 3,554 $ 11,118 $ 10,195
Net realized gains on
investments, net of tax 321 311 1,041 260
Net operating income 3,545 3,243 10,077 9,935
Operating earnings per share -
Basic $ 0.56 $ 0.52 $ 1.60 $ 1.60
Operating earnings per share -
Diluted $ 0.55 $ 0.51 $ 1.57 $ 1.57
In the quarter ended September 30, 2010, the Company reported
GAAP net income under U.S. generally accepted accounting principles
(GAAP) of $3.9 million, or $0.60 per diluted share, as compared to
$3.6 million, or $0.56 per diluted share, in the same quarter of
the prior year. Operating earnings increased to $3.5 million from
the $3.2 million reported in the prior year's quarter.
In the nine months ended September 30, 2010, the Company
reported GAAP net income of $11.1 million, or $1.73 per diluted
share. This result compares to net income of $10.2 million, or
$1.61 per diluted share, for the same period in the previous year.
Operating earnings increased to $10.1 million from $9.9 million in
the prior year. Included in the nine-month results for 2010 was an
after-tax charge of $1.6 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 December 27, 2010 to shareholders of record as of December
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 its 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
September 30,
2010 2009
(unaudited) (unaudited)
Net premiums earned $ 33,714 $ 34,681
Investment income, net of investment expenses 3,428 3,605
Realized investment gains 486 472
Other revenue 502 516
Total revenue 38,130 39,274
Losses and loss adjustment expenses 20,184 21,683
Amortization of deferred policy acquisition costs 9,351 9,499
Other expenses 2,831 2,869
Interest expense 357 358
Total expenses 32,723 34,409
Income before income taxes 5,407 4,865
Income taxes 1,541 1,311
Net income $ 3,866 $ 3,554
Net income per common share:
Basic $ 0.61 $ 0.57
Diluted $ 0.60 $ 0.56
Weighted average number of shares outstanding:
Basic 6,323,843 6,225,483
Diluted 6,460,408 6,389,729
Supplementary Financial Data
Net premiums written $ 31,365 $ 33,355
Book value per common share $ 28.49 $ 25.49
GAAP combined ratio 96.0% 98.2%
Consolidated Statements of Income
(in thousands, except per share and share data)
Nine Months Ended
September 30,
2010 2009
(unaudited) (unaudited)
Net premiums earned $ 101,828 $ 105,215
Investment income, net of investment expenses 10,433 10,833
Realized investment gains 1,576 393
Other revenue 1,478 1,555
Total revenue 115,315 117,996
Losses and loss adjustment expenses 62,851 64,643
Amortization of deferred policy acquisition costs 27,784 29,002
Other expenses 8,179 9,438
Interest expense 1,061 1,066
Total expenses 99,875 104,149
Income before income taxes 15,440 13,847
Income taxes 4,322 3,652
Net income $ 11,118 $ 10,195
Net income per common share:
Basic $ 1.77 $ 1.64
Diluted $ 1.73 $ 1.61
Weighted average number of shares outstanding:
Basic 6,289,558 6,200,840
Diluted 6,436,716 6,321,065
Supplementary Financial Data
Net premiums written $ 100,889 $ 105,537
GAAP combined ratio 97.0% 98.0%
Consolidated Balance Sheet
(in thousands, except share amounts)
September 30, December 31,
2010 2009
(unaudited)
ASSETS
Investments, at fair value:
Fixed income securities, available-for sale $ 410,636 $ 365,464
Equity securities, at fair value 9,600 9,484
Short-term investments, at cost, which
approximates fair value 3,400 -
Total investments 423,636 374,948
Cash and cash equivalents 16,086 39,927
Premiums receivable 38,741 36,405
Reinsurance receivable 75,380 79,599
Prepaid reinsurance premiums 6,311 5,871
Deferred policy acquisition costs 18,841 18,876
Accrued investment income 3,842 4,287
Property and equipment, net 20,622 21,516
Deferred income taxes 109 4,941
Goodwill 5,416 5,416
Other assets 4,440 3,568
Total assets $ 613,424 $ 595,354
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Losses and loss adjustment expenses $ 309,728 $ 311,348
Unearned premiums 76,102 76,601
Accounts payable and accrued expenses 10,771 12,150
Other reinsurance balances 13,244 12,386
Trust preferred securities 15,605 15,592
Advances under line of credit 3,000 3,000
Other liabilities 4,356 4,069
Total liabilities $ 432,806 $ 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
7,114,233 and 7,074,333 shares, outstanding
6,971,228 and 6,883,498 shares
Additional paid-in capital $ 73,037 $ 72,139
Accumulated other comprehensive income 21,877 12,220
Retained earnings 95,494 86,101
Unearned ESOP shares (1,411) (1,878)
Treasury Stock, 632,391 and 632,076 shares (8,379) (8,374)
Total stockholders' equity 180,618 160,208
Total liabilities and stockholders' equity $ 613,424 $ 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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