Mercury General Authorizes $200 Million Share Buy-Back
10 August 1998
Mercury General Authorizes $200 Million Share Buy-Back LOS ANGELES, Aug. 10 -- Mercury General Corporation
, a major California automobile insurer with operations in a number
of other states, announced today that its Board of Directors, at the regular
quarterly meeting on August 7, 1998, authorized the repurchase over a one year
period of up to $200 million of Mercury General's Common Stock. Such
purchases may commence immediately and would be made from time to time in the
open market at the discretion of management. Based on the approximate
$44 mid-point of the trading range of Mercury's stock over the prior two
weeks, (closing price August 7, 1998 - $42.8125), the $200 million repurchase
program would represent approximately 4.5 million shares or about 8% of total
shares outstanding on June 30, 1998. The program would be funded by the sale
of lower yielding tax-exempt bonds, the proceeds of an enlarged bank line and
internal cash generation.
In addition to the announced share repurchase, the Company also announced
that, following the recent price decline, it had purchased over $2.2 million
of Mercury General Common Stock for the Company's profit sharing plan at an
average price of approximately $44, and, as previously disclosed, the
Company's ESOP will be purchasing $5.0 million of Common Stock.
George Joseph, Chairman and CEO of Mercury, said the recent decline of
well over 30% in the price of Mercury's stock had made it possible to invest
Company funds in its own stock on a more favorable basis than the returns
currently being realized from conventional portfolio investments being made by
the Company's insurance subsidiaries.
As one of the lowest cost providers of automobile insurance in California,
Mercury has been the fastest growing major automobile insurer in the state for
several years. Despite intense competition from other insurers seeking to
expand their California writings, Mercury has continued to gain California
market share, with its statewide policyholder count increasing by
approximately 17.0% annualized in both the first and second quarters of 1998,
as well as being up 18.3% year-over-year at June 30, 1998. For the six months
ended June 30, 1998, the Company reported net operating earnings per share
(basic), excluding realized investment gains, of $1.77, a year to year
increase of 47.5%, reflecting excellent underwriting results as measured by a
combined ratio of 84.7%, and a 17.4% increase in after-tax investment income.
Return on shareholders' equity for the period was 23.2%.
The Board also declared a third quarter dividend of $.175 per share
payable on September 30, 1998 to holders of record on September 15, 1998. The
current annual rate of $.70 represents a 20.7% increase over the rate paid in
1997.
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. The statements contained in
this press release that are not historical facts 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 and market acceptance of the Company's products, and in general
economic conditions; the presence of competitors with greater financial
resources and the impact of competitive products and pricing; the effect of
the Company's policies, including the amount and rate of growth of Company
expenses; the continued availability to the Company of adequate funding
sources; delays or difficulties in the production, delivery or installation of
products; 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.
