LOS ANGELES, May 2, 2016 /PRNewswire/ -- Mercury General
Corporation (NYSE: MCY) reported today for the first quarter of
2016:
Consolidated
Highlights
|
|
|
Three Months
Ended
March 31,
|
Change
|
|
|
2016
|
2015
|
$
|
%
|
|
(000's
except per-share amounts and ratios)
|
|
|
|
|
Net premiums written
(1)
|
$
|
797,666
|
|
$
|
740,492
|
|
$
|
57,174
|
|
7.7
|
|
|
Net income
|
$
|
23,323
|
|
$
|
26,165
|
|
$
|
(2,842)
|
|
(10.9)
|
|
|
Net income per
diluted share
|
$
|
0.42
|
|
$
|
0.47
|
|
$
|
(0.05)
|
|
(10.6)
|
|
|
Operating income
(1)
|
$
|
7,036
|
|
$
|
32,640
|
|
$
|
(25,604)
|
|
(78.4)
|
|
|
Operating income per
diluted share (1)
|
$
|
0.13
|
|
$
|
0.59
|
|
$
|
(0.46)
|
|
(78.0)
|
|
|
Catastrophe losses
(2)
|
$
|
8,000
|
|
$
|
2,000
|
|
$
|
6,000
|
|
300.0
|
|
|
Combined ratio
(3)
|
103.9
|
%
|
99.1
|
%
|
—
|
|
4.8 pts
|
|
|
NM = not
meaningful
|
|
|
|
|
|
|
|
(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)
|
2016 catastrophe
losses were primarily the result of severe winter storms in
northern California and in Texas. 2015 catastrophe losses were
primarily the result of tornadoes in Oklahoma.
|
(3)
|
The Company
experienced unfavorable development of approximately $40 million
and favorable development of approximately $3 million on prior
accident years' losses and loss adjustment expenses reserves for
the three months ended March 31, 2016 and 2015, respectively.
The majority of the unfavorable development in the first quarter of
2016 was from the re-estimation of losses for California and
Florida automobile liability coverages. Approximately $34
million of the $40 million of unfavorable development in 2016
relates to 2014 and prior accident years.
|
Investment
Results
|
|
|
Three Months
Ended
March 31,
|
|
2016
|
2015
|
(000's
except average annual yield)
|
|
|
Average invested
assets at cost (1)
|
$
|
3,327,084
|
|
$
|
3,320,746
|
|
Net investment income
(2)
|
|
|
Before income
taxes
|
$
|
29,655
|
|
$
|
31,506
|
|
After income
taxes
|
$
|
26,033
|
|
$
|
27,495
|
|
Average annual yield
on investments - after income taxes (2)
|
3.1
|
%
|
3.3
|
%
|
|
|
(1)
|
Fixed maturities and
short-term bonds at amortized cost; and equities and other
short-term investments at cost. Average invested assets at cost are
based on the monthly amortized cost of the invested assets for each
respective period.
|
(2)
|
For the three months
ended March 31, 2016, net investment income, before and after
income taxes, and average annual yields on investments after
income taxes decreased slightly due to the maturity and replacement
of higher yielding investments purchased when market interest rates
were higher, with lower yielding investments purchased during low
interest rate environments.
|
Additional Commentary:
The Company has been unable to profitably grow its business in
Michigan and Pennsylvania.
Consequently, the Company plans to cease operations in those two
states to focus resources on other states with better opportunities
for sustained profitable growth. Combined results for Michigan and Pennsylvania were as
follows:
|
Years ended
December 31,
|
(000's
except ratios)
|
2015
|
2014
|
Net premiums
written
|
$
|
14,413
|
|
$
|
18,375
|
|
Net premiums
earned
|
$
|
15,366
|
|
$
|
18,573
|
|
Combined
ratio
|
137
|
%
|
130
|
%
|
On April 29, 2016, the Company
filed plans to exit these states with the respective state
regulatory agencies. The Company expects to substantially complete
the run-off of its Michigan and
Pennsylvania operations in
2017.
In line with the goal of improving operating efficiencies
outside of California and overall
long-term profitability, the Company restructured its claims
operations in states outside of California resulting in a workforce reduction
of approximately 100 employees on April
29, 2016. The affected employees were located
primarily in the Company's New
Jersey and Florida branch
offices. The Company expects to record a charge, in the
second quarter of 2016, of approximately $2
million for employment termination costs, and to realize
estimated annual pre-tax savings of approximately $7 million.
In February 2016, the California
Department of Insurance ("CA DOI") approved a 5.0% rate increase on
Mercury Insurance Company's private passenger automobile line of
insurance business, which represented approximately 50% of the
Company's net premiums earned in the first quarter of 2016. This
rate increase was implemented in March
2016. In April 2016, the CA
DOI approved a 6.9% rate increase on California Automobile
Insurance Company's private passenger automobile line of insurance
business, which represented approximately 17% of the Company's
total net premiums earned in the first quarter of 2016. The Company
anticipates that this rate increase will be implemented in
June 2016.
The Board of Directors declared a quarterly dividend of
$0.62 per share. The dividend will be
paid on June 30, 2016 to shareholders
of record on June 16, 2016.
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 www.mercuryinsurance.com. The Company will
be hosting a conference call and webcast today at 10:00 A.M. Pacific time (1:00 P.M. Eastern 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 www.mercuryinsurance.com. A replay of the call will be
available beginning at 1:30 P.M. Pacific
time on May 2, 2016 and
running through May 9, 2016. The
replay telephone numbers are (855) 859-2056 (USA) or (404) 537-3406 (International). The
conference ID# is 89618866. 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 general economic
conditions, including general market risks associated with the
Company's investment portfolio; the accuracy and adequacy of
the Company's pricing methodologies; catastrophes in the
markets served by the Company; 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 the
approval of premium rate changes for insurance policies issued in
states where the Company operates; legislation adverse to the
automobile insurance industry or business generally that may be
enacted in the states where the Company operates; the
Company's success in managing its business in
non-California states; the
presence of competitors with greater financial resources and the
impact of competitive pricing and marketing efforts; the ability of
the Company to successfully manage its claims organization outside
of California following the
announced reduction in workforce; the Company's ability to
successfully allocate the resources used in the Michigan and Pennsylvania markets to its operations in
other states; 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 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.
MERCURY GENERAL
CORPORATION AND SUBSIDIARIES
|
SUMMARY OF
OPERATING RESULTS
|
(000's except
per-share amounts and ratios)
|
(unaudited)
|
|
|
Three Months Ended
March 31,
|
|
2016
|
|
2015
|
Net premiums
written
|
$
|
797,666
|
|
|
$
|
740,492
|
|
|
|
|
|
Revenues:
|
|
|
|
Net premium
earned
|
$
|
767,085
|
|
|
$
|
720,737
|
|
Net investment
income
|
29,655
|
|
|
31,506
|
|
Net realized investment
gains (losses)
|
25,057
|
|
|
(9,961)
|
|
Other
|
2,123
|
|
|
2,266
|
|
Total revenues
|
$
|
823,920
|
|
|
$
|
744,548
|
|
Expenses:
|
|
|
|
Losses and loss adjustment
expenses
|
$
|
594,082
|
|
|
$
|
514,400
|
|
Policy acquisition
costs
|
141,560
|
|
|
133,847
|
|
Other operating
expenses
|
61,294
|
|
|
65,692
|
|
Interest
|
950
|
|
|
750
|
|
Total expenses
|
$
|
797,886
|
|
|
$
|
714,689
|
|
|
|
|
|
Income before income
taxes
|
$
|
26,034
|
|
|
$
|
29,859
|
|
Income tax
expense
|
2,711
|
|
|
3,694
|
|
Net income
|
$
|
23,323
|
|
|
$
|
26,165
|
|
|
|
|
|
Basic average shares
outstanding
|
55,201
|
|
|
55,139
|
|
Diluted average
shares outstanding
|
55,208
|
|
|
55,159
|
|
|
|
|
|
Basic Per Share
Data
|
|
|
|
Net income
|
$
|
0.42
|
|
|
$
|
0.47
|
|
|
|
|
|
Net realized
investment gains (losses), net of tax
|
$
|
0.30
|
|
|
$
|
(0.12)
|
|
|
|
|
|
Diluted Per Share
Data
|
|
|
|
Net income
|
$
|
0.42
|
|
|
$
|
0.47
|
|
|
|
|
|
Net realized
investment gains (losses), net of tax
|
$
|
0.29
|
|
|
$
|
(0.12)
|
|
|
|
|
|
Operating Ratios-GAAP
Basis
|
|
|
|
Loss ratio
|
77.5
|
%
|
|
71.4
|
%
|
Expense
ratio
|
26.4
|
%
|
|
27.7
|
%
|
Combined
ratio
|
103.9
|
%
|
|
99.1
|
%
|
|
|
|
|
Reconciliations of
Operating Measures to Comparable GAAP Measures
|
|
|
|
|
Net premiums
written
|
$
|
797,666
|
|
|
$
|
740,492
|
|
Change in net
unearned premiums
|
(30,581)
|
|
|
(19,755)
|
|
Net premiums
earned
|
$
|
767,085
|
|
|
$
|
720,737
|
|
|
|
|
|
Paid losses and loss
adjustment expenses
|
$
|
565,595
|
|
|
$
|
519,754
|
|
Change in net loss
and loss adjustment expense reserves
|
28,487
|
|
|
(5,354)
|
|
Incurred losses and
loss adjustment expenses
|
$
|
594,082
|
|
|
$
|
514,400
|
|
MERCURY GENERAL
CORPORATION AND SUBSIDIARIES
|
CONDENSED BALANCE
SHEETS AND OTHER INFORMATION
|
(000's except
per-share amounts and ratios)
|
|
|
March 31,
2016
|
|
December 31,
2015
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
Investments, at fair
value:
|
|
|
|
Fixed maturity securities
(amortized cost $2,855,224; $2,804,275)
|
$
|
2,942,514
|
|
|
$
|
2,880,003
|
|
Equity securities (cost
$326,875; $313,528)
|
335,616
|
|
|
315,362
|
|
Short-term investments (cost
$155,201; $185,353)
|
155,185
|
|
|
185,277
|
|
Total investments
|
3,433,315
|
|
|
3,380,642
|
|
Cash
|
235,109
|
|
|
264,221
|
|
Receivables:
|
|
|
|
Premiums
|
465,737
|
|
|
436,621
|
|
Accrued investment
income
|
40,768
|
|
|
42,747
|
|
Other
|
21,176
|
|
|
21,925
|
|
Total receivables
|
527,681
|
|
|
501,293
|
|
Deferred policy
acquisition costs
|
203,565
|
|
|
201,762
|
|
Fixed assets,
net
|
158,412
|
|
|
157,131
|
|
Current income
taxes
|
11,907
|
|
|
9,041
|
|
Deferred income
taxes
|
18,637
|
|
|
23,231
|
|
Goodwill
|
42,796
|
|
|
42,796
|
|
Other intangible
assets, net
|
30,182
|
|
|
31,702
|
|
Other
assets
|
30,459
|
|
|
16,826
|
|
Total assets
|
$
|
4,692,063
|
|
|
$
|
4,628,645
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
Losses and loss
adjustment expenses
|
$
|
1,174,968
|
|
|
$
|
1,146,688
|
|
Unearned
premiums
|
1,078,571
|
|
|
1,049,314
|
|
Notes
payable
|
290,000
|
|
|
290,000
|
|
Accounts payable and
accrued expenses
|
116,765
|
|
|
122,571
|
|
Other
liabilities
|
224,381
|
|
|
199,187
|
|
Shareholders'
equity
|
1,807,378
|
|
|
1,820,885
|
|
Total liabilities and shareholders' equity
|
$
|
4,692,063
|
|
|
$
|
4,628,645
|
|
|
|
|
|
OTHER
INFORMATION
|
|
|
|
Common stock shares
outstanding
|
55,254
|
|
|
55,164
|
|
Book value per
share
|
$32.71
|
|
|
$33.01
|
|
Statutory surplus
(a)
|
$1.42
billion
|
|
|
$1.45
billion
|
|
Premiums written to
surplus ratio (a)
|
2.15
|
|
|
2.07
|
|
Debt to total capital
ratio (b)
|
13.8
|
%
|
|
13.7
|
%
|
Portfolio duration
(including all short-term instruments)(a)(c)
|
3.2 years
|
|
|
3.1 years
|
|
Policies-in-force
(company-wide "PIF")(a)
|
|
|
|
Personal Auto PIF
|
1,197
|
|
|
1,191
|
|
Homeowners PIF
|
540
|
|
|
528
|
|
Commercial Auto
PIF
|
44
|
|
|
44
|
|
(a)
|
Unaudited.
|
(b)
|
Debt to Debt plus
Shareholders' Equity.
|
(c)
|
Modified durations
reflecting anticipated early calls.
|
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 GAAP.
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 effect of net 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
March 31,
|
|
Total
|
Per diluted
share
|
|
2016
|
2015
|
2016
|
2015
|
(000's
except per-share amounts)
|
|
|
|
|
Operating
income
|
$
|
7,036
|
|
$
|
32,640
|
|
$
|
0.13
|
|
$
|
0.59
|
|
Net realized
investment gains (losses), net of tax
|
16,287
|
|
(6,475)
|
|
0.29
|
|
(0.12)
|
|
Net
income
|
$
|
23,323
|
|
$
|
26,165
|
|
$
|
0.42
|
|
$
|
0.47
|
|
Net premiums written represents the premiums charged on
policies issued during a fiscal period less any applicable
reinsurance. Net premiums earned, the most directly comparable GAAP
measure, represents the portion of premiums written that have been
recognized as revenue in the financial statements for the periods
presented and earned on a pro-rata basis over the term of the
policies. Net premiums written are meant as supplemental
information and are 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.
|
Three Months Ended
March 31,
|
|
2016
|
|
2015
|
|
|
|
|
Combined
ratio-accident period basis
|
98.7
|
%
|
|
99.5
|
%
|
Effect of estimated
prior periods' loss development
|
5.2
|
%
|
|
(0.4)
|
%
|
Combined
ratio
|
103.9
|
%
|
|
99.1
|
%
|
Logo - http://photos.prnewswire.com/prnh/20140414/73019
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/mercury-general-corporation-announces-first-quarter-results-and-declares-quarterly-dividend-300260410.html
SOURCE Mercury General Corporation