Mercury General Corporation Reports Second Quarter Results
2 August 1999
Mercury General Corporation Reports Second Quarter Results
LOS ANGELES, Aug. 2 -- Mercury General Corporation
, a major California automobile insurer with operations in a number
of other states, reported today that net operating earnings in the second
quarter of 1999 were $33.9 million, or $.62 per share (diluted), compared with
$47.4 million, or $.85 per share (diluted) in 1998. For the full six months,
net operating earnings were $73.9 million, or $1.35 per share (diluted),
compared with $97.6 million, or $1.76 per share (diluted) in 1998. Per share
net income (diluted), including net realized investment gains, was $.60 for
the second quarter and $1.33 for the full six months, compared with $.90 and
$1.83, respectively, in 1998.
The loss ratio (GAAP basis) was 67.0% in the quarter and 65.0% for the
full six months, compared to 60.0% and 59.4%, respectively, in 1998. The
higher loss ratio in 1999, as compared to 1998, was primarily due to the
7% rate reduction taken in California in April 1998, a higher provision for
California bodily injury loss costs and adverse operating results from the
American Mercury Insurance Group (AMI), which were impacted by catastrophe
losses during the quarter. The loss ratio (GAAP basis) for California
business was 65.3% during the quarter compared to 62.0% in the first quarter
of 1999.
AMI experienced catastrophe losses during the quarter which contributed to
AMI's net operating loss of $0.03 per share (diluted) for the quarter,
compared to a $0.01 loss per share in the second quarter of 1998.
The expense ratio (GAAP basis) was 27.1% in the second quarter and 27.2%
for the full six months, compared to 25.7% and 25.3%, respectively, in 1998.
The increase in the expense ratio was largely attributable to expenses related
to higher base and contingent commissions, advertising expenses and start up
costs from the Company's Florida operations.
Company-wide premiums written in the second quarter were $298.8 million,
an 8.7% increase over 1998. California premiums written in the quarter were
$271.1 million, a 7.4% increase over 1998. California private passenger
automobile policies in-force increased during the second quarter by 14,000
policies to 784,000, an 11% annualized rate of increase from December 31, 1998
and a 7% annualized rate of increase for the quarter.
Despite the Company's competitive rates, California's intense advertising
environment makes growth more difficult to achieve. The Company believes that
continuing its advertising campaign is necessary in the current competitive
environment.
Investment income in the quarter increased 6.4% to $25.1 million. After
taxes, at an effective rate of 9.9% versus 9.5% in 1998, per share (diluted)
investment income was $.41 in the second quarter, up from $.38 in 1998. The
after-tax yield on average investments of $1.6 billion (fixed maturities at
cost and equities at market) was approximately 5.75% in the second quarter, up
from 5.63% in the prior quarter and down from 5.91% for all of 1998.
The Company's authorization to purchase up to $200 million of the
Company's common stock under the plan approved by the Board of Directors last
year expires on August 7, 1999. Since initiating the stock repurchase plan,
the Company has purchased $24.3 million of the Company's shares. On
July 30, 1999, the Board of Directors authorized the purchase, over a one year
period, of $200 million of Mercury General's common stock. In addition, the
Board of Directors declared a regular quarterly dividend of $.21 per share to
be paid on September 30, 1999 to holders of record on September 16, 1999.
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, and in general economic conditions, the possibility actual
loss experience may vary adversely from the actuarial estimates made to
determine the Company's loss reserves; legislation adverse to the automobile
insurance industry or business generally may be enacted in California or other
states; the presence of competitors with greater financial resources and the
impact of competitive pricing 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.
MERCURY GENERAL CORPORATION
SUMMARY OF OPERATING RESULTS (000)
Quarter Ended June 30,
1999 1998
Net Premiums Written $298,790 $274,775
Net Premiums Earned 295,934 278,768
Net Investment Income 25,120 23,602
Net Operating Income (a) 33,905 47,402
Capital Gains (Losses), net of tax (944) 2,853
Net Income $32,961 $50,255
Basic Average Shares Outstanding 54,616,785 55,234,961
Diluted Average Shares Outstanding 54,834,457 55,607,946
Basic Per Share Data
Earnings Per Share $0.60 $0.91
Diluted Per Share Data
Net Operating Income $0.62 $0.85
Capital Gains (Losses), net of tax ($0.02) $0.05
Earnings Per Share $0.60 $0.90
Operating Ratios--GAAP Basis (b)
Loss Ratio 67.0% 60.0%
Expense Ratio 27.1% 25.7%
Combined Ratio 94.1% 85.7%
Six Months Ended June 30,
1999 1998
Net Premiums Written $600,740 $563,793
Net Premiums Earned 586,452 553,222
Net Investment Income 49,108 47,469
Net Operating Income (a) 73,911 97,631
Capital Gains (Losses), net of tax (906) 4,038
Net Income $73,005 $101,669
Basic Average Shares Outstanding 54,606,143 55,195,705
Diluted Average Shares Outstanding 54,836,366 55,580,888
Basic Per Share Data
Earnings Per Share $1.34 $1.84
Diluted Per Share Data
Net Operating Income $1.35 $1.76
Capital Gains (Losses), net of tax ($0.02) $0.07
Earnings Per Share $1.33 $1.83
Operating Ratios--GAAP Basis (b)
Loss Ratio 65.0% 59.4%
Expense Ratio 27.2% 25.3%
Combined Ratio 92.2% 84.7%
(a) Net Income, excluding capital gains, net of tax.
(b) Generally Accepted Accounting Principles