Mercury Announces 2Q Results

August 1, 2005

Mercury General Corporation reported net income of $73.6 million ($1.35 per share-diluted) in the second quarter 2005 compared with $78.1 million ($1.43 per share-diluted) for the same period in 2004. For the first six months of 2005, net income was $134.0 million ($2.45 per share-diluted) compared to net income of $147.0 million ($2.69 per share-diluted) for the same period in 2004. Included in net income are net realized investment gains, net of tax, of $2.3 million ($0.04 per share-diluted) in the second quarter of 2005 compared with net realized investment gains, net of tax, of $7.9 million ($0.14 per share-diluted) for the same period in 2004, and net realized investment gains, net of tax, of $5.0 million ($0.09 per share-diluted) for the first six months of 2005 compared to net realized investment gains, net of tax, of $11.6 million ($0.21 per share-diluted) for the same period in 2004.

Company-wide net premiums written were $729.9 million in the second quarter 2005, a 12.6 percent increase over second quarter 2004 net premiums written of $648.5 million, and were approximately $1.5 billion for the first six months of 2005, a 14.2 percent increase over the same period in 2004. California net premiums written were $525.9 million in the second quarter of 2005, an increase of 5.5 percent over the same period in 2004, and were approximately $1.1 billion for the first six months of 2005, a 5.3 percent increase over the same period in 2004.

Non-California net premiums written were $204.0 million in the second quarter of 2005, a 36.2 percent increase over the same period in 2004, and were $407.7 million for the first six months of 2005, an increase of 45.6 percent increase over the same period in 2004. Non-California net premiums written represented 27.9 percent of the Company’s total second quarter net premiums written, up from 23.1 percent in the second quarter of 2004.

The Company’s combined ratio (GAAP basis) was 90.1 percent in the second quarter and 91.3 percent for the first six months of 2005 compared with 88.3 percent and 88.7 percent for the same periods in 2004. Positive development on prior accident years’ loss reserves was approximately $40 million and $25 million, respectively, for the six months ending June 30, 2005 and June 30, 2004.

Net investment income of $30.7 million (after tax $26.6 million) in the second quarter of 2005 increased by 17.1 percent over the same period in 2004. The after-tax yield on investment income was 3.6 percent on average assets of $3.0 billion (fixed maturities and equities at cost) for the quarter. This compares with an after tax yield on investment income of 3.6 percent on average investments of $2.6 billion (fixed maturities and equities at cost) for the same period in 2004.

The Board of Directors declared a second quarter dividend of $0.43 per share, representing a 16 percent increase over the quarterly dividend amount paid in 2004. The dividend is to be paid on Sept. 29, 2005 to shareholders of record on Sept. 15, 2005. The Company’s book value per share at June 30, 2005 was $28.44.

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