Mercury General Corp. has reported net operating earnings for the second quarter of 2000 were $25.6 million, or $.47 per diluted share, compared with $33.9 million, or $.62 per diluted share in 1999.
For the full six months, net operating earnings were $54.5 million, or $1.01 per diluted share, compared with $73.9 million, or $1.35 per diluted share in 1999. Per share net income, including net realized investment gains and losses, was $.48 for the second quarter and $1.03 for the full six months, compared with $.60 and $1.33, respectively, in 1999.
Company wide premiums written in the quarter were $313.3 million, a 4.9% increase over 1999. California premiums written in the quarter were $278.5 million, a 2.7% increase over 1999. The loss ratio was 71.8% in the quarter compared to 67.0% in 1999.
During the second quarter, the Company recorded approximately $3 million, or 1.0 point, of adverse loss reserve development on prior accident years primarily relating to the Company’s California automobile bodily injury line. In addition, as compared to the first quarter of 2000, the Company recorded an increase in its California bodily injury severity estimates for the 2000 accident year.
The loss ratio for California business was 69.8% in the quarter compared to 65.3% in 1999. The expense ratio was 27.2% in the quarter compared to 27.1% in 1999. The company’s underwriting results were adversely affected during the quarter from its operations outside of California.
The company had an underwriting loss of $10.1 million in the quarter from its operations outside of California compared to an underwriting loss of $5.5 million in the second quarter of 1999. The increased underwriting loss was primarily related to poor loss experience in Florida, Illinois and in the company’s new Texas operations. In addition, operating expenses from the company’s new Texas operations and increased advertising expenses in Florida, Georgia and Illinois contributed to the increased underwriting loss.
Investment income in the quarter increased 4.2% to $26.2 million. After taxes, per diluted share investment income was $.43 per share compared with $.41 in 1999. The after tax yield on average investments of $1.7 billion was 5.59% for the quarter compared with 5.62% obtained for the year ended 1999.
The company also announced that Michael Curtius, President and Chief Operating Officer, has decided to reduce his role with Mercury, effective October 1, 2000. Mr. Curtius will become an executive consultant to the Company in an exclusive capacity, and will take a more active role in strategic planning matters relating to systems and market growth.
He will remain a member of the Board of Directors. George Joseph, Chief Executive Officer, will assume the position of President and Chief Operating Officer. Gabriel Tirador, Vice President and Chief Financial Officer, will assume a greater managerial role in operational matters.
On July 28, 2000, the Board of Directors declared a second quarter dividend of $.24 per share to be paid on September 28, 2000 to holders of record on September 14, 2000. The Company’s book value per share at June 30, 2000 was $17.57 per share.
Mercury has signed a definitive agreement with Employers Reinsurance Corporation to purchase the authority and right to manage and control Elm County Mutual Insurance Company. Elm is a county mutual insurance company in the state of Texas. The transaction is subject to regulatory approval and is expected to close within the next 60 days.
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