Mercury General Reports Q3 Numbers

November 1, 2004

California-based Mercury General Corp. has reported net income of $65.1 million, or $1.19 per share (diluted), in the third quarter 2004 compared with $49.6 million, or $0.91 per share (diluted), in the same period for 2003.

For the first nine months of 2004, net income was $212.1 million ($3.88 per share-diluted) compared to net income of $135.1 million ($2.48 per share-diluted) in the same period for 2003. Included in net income are net realized gains, net of tax, of $0.6 million ($0.01 per share-diluted) in the third quarter 2004 compared to net realized gains, net of tax, of $4.1 million ($0.07 per share-diluted) for the
third quarter 2003, and net realized gains, net of tax, of $12.1 million
($0.22 per share-diluted) for the first nine months of 2004 compared to net realized gains, net of tax, of $3.5 million ($0.06 per share-diluted) for the same period in 2003. Net income in the third quarter of 2004 includes approximately $24 million ($16 million after tax benefit or $0.29 per share-diluted) in losses resulting from the four recent Florida hurricanes.

Company-wide net premiums written were $693.7 million in the third quarter 2004, a 17.5% increase over third quarter 2003 net premiums written of $590.2 million, and were $1,972.5 million for the first nine months of 2004, a 17.6% increase over the same period in 2003.

California net premiums written were $512.6 million in the quarter, an increase of 4.2% over 2003, and were $1,511.4 million for the first nine months of 2004, a 7.6% increase over the same period in 2003. Non-California net premiums written were $181.2 million in the quarter, an 84.4% increase over 2003, and were $461.1 million for the first nine months of 2004, a 69.0% increase over the same period in 2003. Non-California net premiums written represented 26.1% of the company’s total third quarter net premiums written, up from 16.6% in the third quarter of 2003.

The company’s combined ratio (GAAP basis) was 90.8% in the third quarter and 89.4% for the first nine months of 2004 compared with 93.4% for the third quarter and 94.0% for the nine month period in 2003. Favorable loss frequency trends and positive development of approximately $40 million for the nine month period ended Sept. 30, 2004 on the 2003 and prior accident year loss reserves contributed to the improvement in the combined ratio. The Florida hurricanes negatively impacted the combined ratio by 3.7% for the third
quarter of 2004 and 1.3% for the first nine months of 2004.

Net investment income was $28.4 million (after tax $24.5 million) in the third quarter of 2004. The after-tax yield on investment income was 3.6% on average assets of $2.7 billion (fixed maturities and equities at cost) for the quarter. This compares with an after tax yield on investment income of 3.8% on average investments of $2.3 billion (fixed maturities and equities at cost) for the same period in 2003.

During October 2004, the company began writing private passenger
automobile insurance in Michigan, marking the 12th state in which the
company writes automobile insurance.

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