PENNINGTON, NJ today reported its operating results for the
quarter and six months ended June 30, 2008. Mercer Insurance Group,
Inc. (the Company) offers commercial and personal lines of
insurance to businesses and individuals principally in six states
through its insurance subsidiaries: Mercer Insurance Company,
Mercer Insurance Company of New Jersey, Inc., Financial Pacific
Insurance Company and Franklin Insurance Company.
In comparing the current results to the prior year, the reader
should be aware that in last year's quarter ended June 30, 2007,
the Company recognized a non-recurring refund of state premium
retaliatory taxes, plus interest (collectively, the "Retaliatory
Tax"), in the after-tax amount of $2.5 million, or $0.39 per
diluted share. Nothing of a comparable nature is recognized in the
current period. A discussion of this item can be found in the
Liquidity and Capital Resources section of Item 7 of the Form 10-K
for the most recent year.
In the quarter ended June 30, 2008, the Company reported net
income, determined under U.S. generally accepted accounting
principles (GAAP), of $3.2 million, or $0.51 per diluted share.
This result compares to net income of $5.8 million, or $0.92 per
diluted share, for the same quarter in the previous year, which
included the Retaliatory Tax refund described above. Excluding the
impact of the Retaliatory Tax refund from the prior year results,
net income for the current quarter approximates the adjusted net
income of $3.3 million, or $0.53 per diluted share of the earlier
period. After-tax realized investment gains included in net income
for the current quarter were $102,000, or less than $0.02 per
diluted share, as compared to a gain of $442,000, or $0.07 per
diluted share, in the same period in the prior year. Operating
income (a non-GAAP measure defined as net income less after-tax
realized gains or losses) in the second quarter of 2008 was $3.1
million, or $0.49 per diluted share, as compared to $5.3 million,
or $0.85 per diluted share, in the same quarter of 2007, which
included the Retaliatory Tax refund. After adjusting to exclude the
Retaliatory Tax refund from the prior period's second quarter, the
operating income of the current year's second quarter represented
an increase of $0.3 million, or $0.03 per diluted share, from the
adjusted operating income of $2.8 million, or $0.46 per diluted
share, of the prior year. The Company's GAAP combined ratio for the
second quarter of 2008 was 98.2%, as compared to 89.4% for the same
quarter in 2007, or an adjusted combined ratio of 98.3% for the
prior period after excluding the impact of the Retaliatory Tax
refund described above. Book value at June 30, 2008 was $21.78 per
share.
Revenues for the second quarter of 2008 were $42.7 million, an
increase of $2.7 million over the 2007 second quarter revenue of
$40.0 million. Net premiums earned for the quarter were $38.6
million, a $3.5 million increase over net premiums earned of $35.1
million in the same period of 2007. Net investment income was $3.3
million for the quarter, as compared to $3.8 million in the
comparable period in 2007, however, on an adjusted basis after
excluding the interest included with the Retaliatory Tax refund in
the prior year, the current quarter's investment income represents
an increase of $259,000, or 8%, over the adjusted net investment
income in the prior year's quarter.
For the six months ended June 30, 2008, the Company's GAAP net
income was $5.8 million, or $0.91 per diluted share. This result
compares to net income of $8.3 million, or $1.32 per diluted share,
for the six months ended June 30, 2007, which included the
Retaliatory Tax refund. The current year net income approximates
the prior period results of $5.8 million, or $0.93 per diluted
share, when such results are adjusted to exclude the impact of the
Retaliatory Tax refund. After-tax realized investment losses
included in net income for the six months ended June 30, 2008, were
$431,000, or $0.07 per diluted share, as compared to a gain of
$412,000, or $0.07 per diluted share, in the same period in the
prior year. Operating income for the six months ended June 30,
2008, was $6.3 million, or $0.98 per diluted share, as compared to
$7.9 million, or $1.26 per diluted share in the prior year, which
included the Retaliatory Tax refund. After making an adjustment to
exclude the Retaliatory Tax refund from the prior period's
operating income, the current year operating income represents an
increase of $0.9 million, or $0.12 per diluted share, from the
adjusted operating income of $5.4 million, or $0.86 per diluted
share, of the prior year. The Company's GAAP combined ratio for the
six months ended June 30, 2008, was 98.2%, as compared to 93.8% for
the same period in 2007, or an adjusted combined ratio of 98.3% for
the prior period after excluding the impact of the Retaliatory Tax
refund described above.
Revenues for the first six months of 2008 were $84.8 million, an
increase of $7.5 million over the 2007 revenues of $77.3 million
for the same period. Net premiums earned for the six months were
$77.7 million, an $8.6 million increase over net premiums earned of
$69.1 million in the same period of 2007. Net investment income was
$6.7 million for the six months, as compared to the same amount in
the comparable period in 2007, however, on an adjusted basis after
excluding the interest component of the Retaliatory Tax refund from
the prior year results, the current period's investment income
represents an increase of $678,000, or 11%, over adjusted net
investment income of $6.0 million in the prior year period.
Mr. Andrew R. Speaker, President and CEO, in commenting on the
results, said, "Although we are pleased with our results in the
current quarter, the twin challenges of increased competition in
our marketplace and a lackluster economy, particularly in the
construction industry, continue to make it more difficult to
generate new profitable revenue. As we compete in this challenging
marketplace we will remain focused on maintaining our underwriting
discipline, working with our agency partners to identify
opportunities to write insurance at rates allowing us to make an
adequate return."
The Board of Directors of Mercer Insurance Group, Inc. has
approved a dividend of $0.075 per share, to be paid on September
29, 2008 to shareholders of record on September 12, 2008.
Certain of the statements contained herein (other than
statements of historical facts) are forward-looking statements.
Such forward-looking statements are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act
of 1995 and 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 so that the effect of
future developments on Mercer Insurance Group, Inc. will be those
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 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,
2008 2007
(unaudited) (unaudited)
Net premiums earned $ 38,644 $ 35,076
Investment income,
net of investment expenses 3,343 3,771
Realized investment gains 157 680
Other revenue 564 481
Total revenue 42,708 40,008
Losses and loss adjustment expenses 23,975 21,821
Amortization of deferred policy
acquisition costs 10,341 9,182
Other expenses 3,647 361
Interest expense 337 304
Total expenses 38,300 31,668
Income before income taxes 4,408 8,340
Income taxes 1,175 2,550
Net income $ 3,233 $ 5,790
Net income per common share:
Basic $ 0.52 $ 0.95
Diluted $ 0.51 $ 0.92
Weighted average number of
shares outstanding:
Basic 6,233,796 6,113,966
Diluted 6,387,750 6,324,737
Supplementary Financial Data
Net written premiums $ 43,749 $ 47,206
Book value per common share $ 21.78 $ 19.93
GAAP combined ratio 98.2% 89.4%
Consolidated Statements of Income
(in thousands, except per share and share data)
Six Months Ended
June 30,
2008 2007
(unaudited) (unaudited)
Net premiums earned $ 77,721 $ 69,064
Investment income,
net of investment expenses 6,704 6,712
Realized investment (losses) gains (663) 633
Other revenue 1,019 907
Total revenue 84,781 77,316
Losses and loss adjustment expenses 48,745 42,630
Amortization of deferred policy
acquisition costs 20,703 17,959
Other expenses 6,842 4,215
Interest expense 633 611
Total expenses 76,923 65,415
Income before income taxes 7,858 11,901
Income taxes 2,033 3,558
Net income $ 5,825 $ 8,343
Net income per common share:
Basic $ 0.94 $ 1.37
Diluted $ 0.91 $ 1.32
Weighted average number of
shares outstanding:
Basic 6,226,772 6,100,652
Diluted 6,382,926 6,307,075
Supplementary Financial Data
Net written premiums $ 78,288 $ 82,007
GAAP combined ratio 98.2% 93.8%
Consolidated Balance Sheet
(in thousands, except share amounts)
June 30, December 31,
2008 2007
(unaudited)
ASSETS
Investments, at fair value:
Fixed income securities, available-for sale $ 330,965 $ 324,238
Equity securities, at fair value 16,628 17,930
Total investments 347,593 342,168
Cash and cash equivalents 19,394 21,580
Premiums receivable 39,747 36,339
Reinsurance receivable 89,164 83,844
Prepaid reinsurance premiums 8,174 9,486
Deferred policy acquisition costs 20,932 20,528
Accrued investment income 3,783 3,582
Property and equipment, net 14,841 13,056
Deferred income taxes 9,055 7,670
Goodwill 5,416 5,416
Other assets 4,111 2,766
Total assets $ 562,210 $ 546,435
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Losses and loss adjustment expenses $ 293,540 $ 274,399
Unearned premiums 87,280 88,024
Accounts payable and accrued expenses 11,546 14,622
Other reinsurance balances 13,155 14,734
Trust preferred securities 15,567 15,559
Advances under line of credit 3,000 3,000
Other liabilities 2,323 2,691
Total liabilities $ 426,411 $ 413,029
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 7,075,333
shares, outstanding 6,766,952 and 6,717,693
shares - -
Additional paid-in capital $ 70,912 $ 70,394
Accumulated other comprehensive income 1,881 4,896
Retained earnings 72,657 67,613
Unearned ESOP shares (2,819) (3,131)
Treasury Stock, 532,158 and 505,814 shares (6,832) (6,366)
Total stockholders' equity 135,799 133,406
Total liabilities and stockholders' equity $ 562,210 $ 546,435
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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