Mercer Insurance Group, Inc. (NASDAQ: MIGP) reported today its
operating results for the year and quarter ended December 31, 2010.
On November 30, 2010, Mercer Insurance Group, Inc. ("Mercer
Insurance" or the "Company") and United Fire & Casualty Company
("United Fire") of Cedar Rapids, Iowa, issued a joint press release
announcing that Mercer Insurance had entered into an agreement and
plan of merger with United Fire (the "Merger Agreement") pursuant
to which it will acquire all of the outstanding shares of Mercer
Insurance for $28.25 per share. The consummation of the merger is
subject to United Fire receiving the appropriate regulatory
approvals from state insurance regulators, the approval of Mercer
Insurance's shareholders, and other terms and conditions set forth
in the Merger Agreement. The Merger Agreement was unanimously
approved by the Board of Directors of Mercer Insurance. A copy of
the agreement was provided as Exhibit 2.1 to the Form 8-K filed by
Mercer Insurance with the Securities and Exchange Commission on
December 1, 2010. Pursuant to the terms of the Merger Agreement,
Mercer Insurance has discontinued its quarterly dividend.
The Company's fourth quarter highlights include:
-- Net income of $0.55 per diluted share versus $0.57 per diluted share in
the prior year's quarter,
-- Operating income of $0.53 per diluted share versus $0.54 per diluted
share in the prior year's quarter,
-- A GAAP combined ratio of 94.3% versus 96.5% in the prior year's
quarter, and
-- Book value per share of $27.88.
Financial Summary (in thousands, except per share data)
Three Months Ended Year Ended
December 31, December 31,
(unaudited) (unaudited)
-------------------- --------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Total revenue $ 38,243 $ 39,315 $ 153,558 $ 157,312
Net premiums written 31,807 32,293 132,696 137,830
Net premiums earned 34,136 35,198 135,964 140,413
Net investment income 3,445 3,365 13,878 14,198
Net realized gains on
investments 210 228 1,786 621
Net income 3,618 3,626 14,736 13,821
Earnings per share - Basic $ 0.57 $ 0.58 $ 2.34 $ 2.23
Earnings per share - Diluted $ 0.55 $ 0.57 $ 2.28 $ 2.18
Combined ratio 94.3% 96.5% 96.4% 97.6%
Book value per share $ 27.88 $ 25.63
Reconciliation of non-GAAP
financial measures:
Net income $ 3,618 $ 3,626 $ 14,736 $ 13,821
Net realized gains on
investments, net of tax 138 150 1,179 410
Net operating income 3,480 3,476 13,557 13,411
Operating earnings per share -
Basic $ 0.55 $ 0.56 $ 2.15 $ 2.16
Operating earnings per share -
Diluted $ 0.53 $ 0.54 $ 2.10 $ 2.11
In the quarter ended December 31, 2010, the Company reported
GAAP net income of $3.6 million, or $0.55 per diluted share, as
compared to approximately the same amount, or $0.57 per diluted
share, in the same quarter of the prior year. Operating earnings
remained approximately the same as the prior year's quarter at $3.5
million, and $0.53 and $0.54 per diluted share for the three months
ended December 31, 2010 and 2009, respectively. Included in the
expenses of the current year's quarter was an after-tax charge of
$204,000 for merger-related expenses, or $0.03 per diluted
share.
In the year ended December 31, 2010, the Company reported GAAP
net income of $14.7 million, or $2.28 per diluted share. This
result compares to net income of $13.8 million, or $2.18 per
diluted share, for the same period in the previous year. Operating
earnings increased to $13.6 million from $13.4 million in the prior
year, or $2.10 and $2.11 per diluted share, respectively. Included
in the full year results for 2010 was an after-tax charge of $1.6
million for catastrophes 94 and 96, and an after-tax charge for
merger-related expenses of $204,000.
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 Insurance'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. 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
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,
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
December 31,
2010 2009
(unaudited) (unaudited)
Net premiums earned $ 34,136 $ 35,198
Investment income, net of investment expenses 3,445 3,365
Realized investment gains 210 228
Other revenue 452 524
Total revenue 38,243 39,315
Losses and loss adjustment expenses 20,886 21,499
Amortization of deferred policy acquisition costs 9,307 9,803
Other expenses 2,002 2,652
Interest expense 358 356
Merger-related expenses 314 -
Total expenses 32,867 34,310
Income before income taxes 5,376 5,005
Income taxes 1,758 1,379
Net income $ 3,618 $ 3,626
Net income per common share:
Basic $ 0.57 $ 0.58
Diluted $ 0.55 $ 0.57
Weighted average number of shares outstanding:
Basic 6,353,814 6,243,618
Diluted 6,542,171 6,402,686
Supplementary Financial Data
Net premiums written $ 31,807 $ 32,293
Book value per common share $ 27.88 $ 25.63
GAAP combined ratio 94.3% 96.5%
Consolidated Statements of Income
(in thousands, except per share and share data)
Year Ended
December 31,
2010 2009
(unaudited)
Net premiums earned $ 135,964 $ 140,413
Investment income, net of investment expenses 13,878 14,198
Realized investment gains 1,786 621
Other revenue 1,930 2,080
Total revenue 153,558 157,312
Losses and loss adjustment expenses 83,737 86,142
Amortization of deferred policy acquisition costs 37,091 38,805
Other expenses 10,181 12,090
Interest expense 1,419 1,423
Merger-related expense 314 -
Total expenses 132,742 138,460
Income before income taxes 20,816 18,852
Income taxes 6,080 5,031
Net income $ 14,736 $ 13,821
Net income per common share:
Basic $ 2.34 $ 2.23
Diluted $ 2.28 $ 2.18
Weighted average number of shares outstanding:
Basic 6,305,754 6,211,623
Diluted 6,465,863 6,345,164
Supplementary Financial Data
Net premiums written $ 132,696 $ 137,830
GAAP combined ratio 96.4% 97.6%
Consolidated Balance Sheet
(in thousands, except share amounts)
December 31, December 31,
2010 2009
(unaudited)
ASSETS
Investments, at fair value:
Fixed income securities, available-for-sale $ 397,130 $ 365,464
Equity securities, at fair value 10,691 9,484
Short-term investments, at cost, which
approximates fair value 9,849 -
Total investments 417,670 374,948
Cash and cash equivalents 16,345 39,927
Premiums receivable 35,172 36,405
Reinsurance receivable 72,905 79,599
Prepaid reinsurance premiums 6,331 5,871
Deferred policy acquisition costs 18,192 18,876
Accrued investment income 4,261 4,287
Property and equipment, net 20,316 21,516
Deferred income taxes 3,141 4,941
Goodwill 5,416 5,416
Other assets 3,846 3,568
Total assets $ 603,595 $ 595,354
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Losses and loss adjustment expenses $ 304,641 $ 311,348
Unearned premiums 73,793 76,601
Accounts payable and accrued expenses 11,685 12,150
Other reinsurance balances 12,906 12,386
Trust preferred securities 15,609 15,592
Advances under line of credit 3,000 3,000
Other liabilities 4,412 4,069
Total liabilities $ 426,045 $ 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
7,126,233 and 7,074,333 shares, outstanding
7,000,009 and 6,883,498 shares
Additional paid-in-capital $ 73,386 $ 72,139
Accumulated other comprehensive income 15,315 12,220
Retained earnings 98,481 86,101
Unearned ESOP shares (1,253) (1,878)
Treasury Stock, 632,391 and 632,076 shares (8,379) (8,374)
Total stockholders' equity 177,550 160,208
Total liabilities and stockholders' equity $ 603,595 $ 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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