Mercury General Reports Q2 Net Income of $69.5 Million

Mercury General Corporation Announces Second Quarter Results

Los Angeles-based Mercury General Corp. has reported net income of $69.5 million in the second quarter 2007 compared with $37.8 million for the same period in 2006. For the first six months of 2007, net income was $130 million compared to net income of $96.5 million for the same period in 2006. Included in net income are net realized investment gains, net of tax, of $6.5 million in the second quarter of 2007 compared with net realized investment gains, net of tax, of $2.8 million for the same period in 2006, and net realized investment gains, net of tax, of $5.8 million for the first six months of 2007 compared to net realized investment gains, net of tax, of $6.9 million for the same period in 2006.

Company-wide net premiums written were $737.4 million in the second quarter 2007, a 2.2 percent decrease over second quarter 2006 net premiums written of $753.8 million, and were approximately $1.5 billion for the first six months of 2007, a 0.3 percent decrease over the same period in 2006. California net premiums written were $567.9 million in the second quarter of 2007, an increase of 2.9 percent over the same period in 2006, and were approximately $1.2 billion for the first six months of 2007, a 4.6 percent increase over the same period in 2006. Non-California net premiums written were $169.5 million in the second quarter of 2007, a 16 percent decrease over the same period in 2006, and were $354.4 million for the first six months of 2007, a decrease of 13.5 percent over the same period in 2006.

During the second quarter of 2007, the company accrued $5 million as a reduction to California premiums in anticipation of issuing coupons that are redeemable towards new and renewal premiums as part of the settlement of a lawsuit. The impact of this accrual, net of tax, is a reduction to net income of $3.3 million for both the second quarter and the first six months of 2007. For the second quarter of 2007, the accrual added 0.7 points to the company-wide decrease in premiums written and reduced the growth in California premiums written by 0.9 points.

The company’s combined ratio was 94 percent in the second quarter and 94.3 percent for the first six months of 2007 compared with 98.6 percent and 95.3 percent for the same periods in 2006. Loss development on prior accident years’ loss reserves was approximately $13 million adverse for the six months ended June 30, 2007, compared with approximately $15 million adverse for the same period in 2006. Adverse loss development on prior accident years’ loss reserves for the six months of 2007 came primarily from the Company’s California operations. As reported previously, for the states outside of California, the Company experienced adverse development for the six months ended June 30, 2006 of approximately $30 million on prior accident years’ loss reserves, largely due to additional reserves established for large individual losses in Florida and additional reserves established for personal injury protection and bodily injury losses in New Jersey. The company experienced positive development on prior accident years’ loss reserves of approximately $15 million for the six months ended June 30, 2006 on its California business.

The Board of Directors declared a third quarter dividend of $0.52 per share, representing an 8.3 percent increase over the quarterly dividend amount paid in 2006. The dividend is to be paid on Sept. 27, 2007 to shareholders on Sept. 14, 2007.

Mercury General Corp. 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 www.mercuryinsurance.com.

Source: Mercury General