LOS ANGELES, Feb. 8 /PRNewswire-FirstCall/ -- Mercury General
Corporation (NYSE:MCY) reported today for the fourth quarter of
2009: Consolidated Highlights Three Months Ended Change December
31, ------ 2009 2008 $ % ---- ---- --- --- (000's except per-share
amounts and ratios) Net premiums written (1) $618,919 $641,641
$(22,722) (3.5) Net income (loss) (5) $34,235 $(168,345) $202,580 -
Net income (loss) per diluted share $0.62 $(3.07) $3.69 - Operating
income (loss) (1) (5) $38,203 $(26,706) $64,909 243.1 Operating
income (loss) per diluted share (1) $0.69 $(0.48) $1.17 243.8
Severance related expenses (2) $- $- $- - Net expense related to
amortization of December 31, 2008 AIS deferred policy acquisition
costs (2) (3) $- $- $- - Catastrophe losses (2) (4) $- $20,000
$(20,000) - Favorable tax ruling (5) $- $- $- - Combined ratio
98.1% 113.4% - (15.3) pts Twelve Months Ended Change December 31,
------ 2009 2008 $ % ---- ---- --- --- (000's except per-share
amounts and ratios) Net premiums written (1) $2,589,972 $2,750,226
$(160,254) (5.8) Net income (loss) (5) $403,072 $(242,119) $645,191
- Net income (loss) per diluted share $7.32 $(4.42) $11.74 -
Operating income (loss) (1) (5) $177,883 $115,719 $62,164 53.7
Operating income (loss) per diluted share (1) $3.23 $2.12 $1.11
52.3 Severance related expenses (2) $8,000 $- $8,000 - Net expense
related to amortization of December 31, 2008 AIS deferred policy
acquisition costs (2) (3) $15,000 $- $15,000 - Catastrophe losses
(2) (4) $- $26,000 $(26,000) - Favorable tax ruling (5) $- $17,500
$(17,500) - Combined ratio 96.9% 101.8% - (4.9) 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 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. (4) Catastrophe losses in 2008
were primarily the result of Southern California wildfires
(estimated $20 million during the fourth quarter) and Hurricane Ike
(estimated $6 million during the third quarter). (5) The Company
recognized a net tax benefit of $17.5 million in the third quarter
2008 as a result of a favorable California Superior Court ruling.
This amount is included in both the operating income and net loss
for 2008. Net income in the fourth quarter 2009 was $34.2 million
($0.62 per diluted share) compared with net loss of $168.3 million
($3.07 per diluted share) for the same period in 2008. For the
year, net income was $403.1 million ($7.32 per diluted share)
compared with net loss of $242.1 million ($4.42 per diluted share)
for the same period in 2008. Included in net income (loss) are net
realized investment losses, net of tax, of $4.0 million ($0.07 per
diluted share) in the fourth quarter of 2009 compared with net
realized investment losses, net of tax, of $141.6 million ($2.59
per diluted share) for the same period in 2008, and net realized
investment gains, net of tax, of $225.2 million ($4.09 per diluted
share) for the year compared to net realized investment losses, net
of tax, of $357.8 million ($6.54 diluted share) for the same period
in 2008. Operating income was $38.2 million ($0.69 per diluted
share) for the fourth quarter of 2009 compared with operating loss
of $26.7 million ($0.48 per diluted share) for the same period in
2008. For the year, operating income was $177.9 million ($3.23 per
diluted share) compared with operating income of $115.7 million
($2.12 per diluted share) for the same period in 2008. Net realized
investment losses, net of tax, of $4.0 million for the fourth
quarter of 2009 and net realized investment gains, net of tax, of
$225.2 million for the year include losses, net of tax, of $6.6
million, and gains, net of tax, of $257.1 million, respectively,
from the election of the fair value option. Gains and losses, net
of tax, from the sale of securities were $2.6 million and $34.3
million during the fourth quarter and the year, respectively. Net
premiums written were $618.9 million in the fourth quarter of 2009,
a 3.5% decrease over fourth quarter 2008 net premiums written of
$641.6 million, and were approximately $2.6 billion for the year, a
5.8% decrease over the same period in 2008. The rate of premium
decline slowed over the course of the year. The Company experienced
premium decreases of 8.0%, 6.8%, and 4.7% in the first, second, and
third quarter 2009, respectively, over comparable quarters in 2008.
The Company's combined ratio (GAAP basis) was 98.1% in the fourth
quarter of 2009 and 96.9% for the year compared with 113.4% and
101.8% for the same periods in 2008. Loss development on prior
periods' loss reserves was approximately $58 million positive for
the year ended 2009, compared with approximately $89 million
adverse for the same period in 2008. The favorable development in
2009 is largely the result of re-estimates of California bodily
injury losses which have experienced both lower average severities
and fewer late reported claims (claim count development) than was
originally estimated at December 31, 2008. Net investment income of
$35.6 million (after tax, $23.1 million) in the fourth quarter of
2009 increased by 2.1% over the same period in 2008. The investment
income after-tax yield was 4.1% on average investments (fixed
maturities at amortized cost, equities and short-term investments
at cost) of $3.1 billion for the fourth quarter 2009. This compares
with an investment income after-tax yield of 3.7% on average
investments of $3.4 billion for the same period in 2008. Net
investment income for the year was $144.9 million (after tax,
$130.1 million), a decrease of 4.2% over the same period in 2008.
The investment income after-tax yield was 4.1% on average assets of
$3.2 billion for the year. This compares with an investment income
after-tax yield of 3.9% on average investments of $3.5 billion for
the same period in 2008. The Board of Directors declared a
quarterly dividend of $0.59 per share, representing a 1.7% increase
over the quarterly dividend amount paid in 2009. The dividend is to
be paid on March 31, 2010 to shareholders of record on March 16,
2010. 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 February 15, 2010. The replay telephone numbers are (800)
642-1687 (USA) or (706) 645-9291 (International). The conference
ID# is 50251265. 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 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 December 31, Per diluted Total
share (1) ----- ----------- 2009 2008 2009 2008 ---- ---- ---- ----
(000's except per-share amounts) Operating income (loss) $38,203
$(26,706) $0.69 $(0.48) Net realized investment gains (losses), net
of tax (3,968) (141,639) (0.07) (2.59) ------ -------- ----- -----
Net income (loss) $34,235 $(168,345) $0.62 $(3.07) =======
========= ===== ====== Twelve Months Ended December 31, Per diluted
Total share (1) ----- ----------- 2009 2008 2009 2008 ---- ----
---- ---- (000's except per-share amounts) Operating income (loss)
$177,883 $115,719 $3.23 $2.12 Net realized investment gains
(losses), net of tax 225,189 (357,838) 4.09 (6.54) ------- --------
---- ----- Net income (loss) $403,072 $(242,119) $7.32 $(4.42)
======== ========= ===== ====== (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 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
is meant as supplemental information and is 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.
Twelve Months Ended December 31, ------------- 2009 2008 ---- ----
Combined ratio-accident period basis 99.0% 98.8% Effect of
estimated prior periods' loss development (2.1)% 3.0% ---- ---
Combined ratio 96.9% 101.8% ==== ===== MERCURY GENERAL CORPORATION
AND SUBSIDIARIES SUMMARY OF OPERATING RESULTS (000's except
per-share amounts and ratios) (unaudited) Quarter Ended Twelve
Months Ended December 31, December 31, 2009 2008 2009 2008 ----
---- ---- ---- Net premiums written $618,919 $641,641 $2,589,972
$2,750,226 Revenues: Net premium earned $646,101 $680,114 2,625,133
2,808,839 Net investment income 35,615 34,900 144,949 151,280 Net
realized investment gains (losses) (6,105) (217,906) 346,444
(550,520) Other 1,711 788 4,967 4,597 ----- --- ----- ----- Total
revenues $677,322 $497,896 $3,121,493 $2,414,196 -------- --------
---------- ---------- Expenses: Incurred losses 446,042 575,585
1,782,233 2,060,409 Policy acquisition costs 129,245 152,742
543,307 624,854 Other operating expenses 59,067 42,994 217,683
174,828 Interest 1,670 1,307 6,729 4,966 ----- ----- ----- -----
Total expenses $636,024 $772,628 $2,549,952 $2,865,057 --------
-------- ---------- ---------- Income before income taxes $41,298
$(274,732) $571,541 $(450,861) Income tax expense (benefit) 7,063
(106,387) 168,469 (208,742) ----- -------- ------- -------- Net
income (loss) $34,235 $(168,345) $403,072 $(242,119) =======
========= ======== ========= Basic average shares outstanding
54,772 54,763 54,770 54,744 Diluted average shares outstanding
55,243 55,028 55,092 54,917 Basic Per Share Data
-------------------- Net income (loss) $0.63 $(3.07) $7.36 $(4.42)
===== ====== ===== ====== Net realized investment gains (losses),
net of tax $(0.07) $(2.59) $4.11 $(6.54) ====== ====== ===== ======
Diluted Per Share Data ---------------------- Net income (loss) (a)
$0.62 $(3.07) $7.32 $(4.42) ===== ====== ===== ====== Net realized
investment gains (losses), net of tax (a) $(0.07) $(2.59) $4.09
$(6.54) ====== ====== ===== ====== Operating Ratios-GAAP Basis
--------------------------- Loss ratio 69.0% 84.6% 67.9% 73.3%
Expense ratio 29.1% 28.8% 29.0% 28.5% ---- ---- ---- ---- Combined
ratio 98.1% 113.4% 96.9% 101.8% ==== ===== ==== =====
Reconciliations of Operating Measures to Comparable GAAP Measures
---------------------------- Net premiums written $618,919 $641,641
$2,589,972 $2,750,226 Decrease in unearned premiums 27,182 38,473
35,161 58,613 ------ ------ ------ ------ Net premiums earned
$646,101 $680,114 $2,625,133 $2,808,839 ======== ========
========== ========== Paid losses and loss adjustment expenses
$451,018 $492,693 $1,864,426 $2,032,088 (Decrease) increase in net
loss and loss adjustment expense reserves (4,976) 82,892 (82,193)
28,321 ------ ------ ------- ------ Incurred losses and loss
adjustment expenses $446,042 $575,585 $1,782,233 $2,060,409
======== ======== ========== ========== (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) December 31, 2009
December 31, 2008 ----------------- ----------------- ASSETS ------
Investments: Fixed maturities trading, at fair value (amortized
cost $2,673,079; $2,728,471) $2,704,561 $2,481,673 Equity
securities trading, at fair value (cost $308,941; $403,773) 286,131
247,391 Short-term investments, at fair value (amortized cost
$156,126; $208,278) 156,165 204,756 ------- ------- Total
investments 3,146,857 2,933,820 Cash 185,505 35,396 Receivables:
Premiums receivable 262,278 268,227 Premium notes 14,510 25,699
Accrued investment income 37,405 36,540 Other 13,689 9,526 ------
----- Total receivables 327,882 339,992 Deferred policy acquisition
costs 175,866 200,005 Fixed assets, net 201,862 191,777 Current
income taxes 27,268 43,378 Deferred income taxes 36,139 171,025
Goodwill 42,850 5,206 Other intangible assets 66,823 - Other assets
21,581 29,596 ------ ------ Total assets $4,232,633 $3,950,195
========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------ Losses and loss adjustment
expenses $1,053,334 $1,133,508 Unearned premiums 844,540 879,651
Notes payable 271,397 158,625 Accounts payable and accrued expenses
114,469 93,864 Other liabilities 177,947 190,496 Shareholders'
equity 1,770,946 1,494,051 --------- --------- Total liabilities
and shareholders' equity $4,232,633 $3,950,195 ==========
========== OTHER INFORMATION ----------------- Common stock-shares
outstanding 54,777 54,764 Book value per share $32.33 $27.28
Estimated statutory surplus $1.5 billion $1.4 billion Estimated
premiums written to surplus ratio 1.7 2.0 Debt to total capital
ratio 13.3% 9.6% Portfolio duration 5.1 years 6.5 years
Policies-in-Force (Company-wide "PIF") Personal Auto PIF 1,279
1,321 Homeowners PIF 328 303 DATASOURCE: Mercury General
Corporation CONTACT: Theodore Stalick, VP/CFO of Mercury General
Corporation, +1-323-937-1060 Web Site:
http://www.mercuryinsurance.com/ Company News On-Call:
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