Los Angeles-based Mercury General Corp. has reported net income of $37.8 million ($0.69 per share-diluted) in the second quarter 2006 compared with $73.6 million ($1.35 per share-diluted) for the same period in 2005. For the first six months of 2006, net income was $96.5 million ($1.76 per share-diluted) compared to net income of $134 million ($2.45 per share-diluted) for the same period in 2005. Included in net income are net realized investment gains, net of tax, of $2.8 million ($0.05 per share-diluted) in the second quarter of 2006 compared with net realized investment gains, net of tax, of $2.3 million ($0.04 per share-diluted) for the same period in 2005, and net realized investment gains, net of tax, of $6.9 million ($0.13 per share-diluted) for the first six months of 2006 compared to net realized investment gains, net of tax, of $5.0 million ($0.09 per share-diluted) for the same period in 2005.
Company-wide net premiums written were $753.8 million in the second quarter 2006, a 3.3 percent increase over second quarter 2005 net premiums written of $729.9 million, and were approximately $1.5 billion for the first six months of 2006, a 4.7 percent increase over the same period in 2005. California net premiums written were $552.1 million in the second quarter of 2006, an increase of 5 percent over the same period in 2005, and were approximately $1.1 billion for the first six months of 2006, a 6.3 percent increase over the same period in 2005. Non-California net premiums written were $201.7 million in the second quarter of 2006, a 1.1 percent decrease over the same period in 2005, and were $409.8 million for the first six months of 2006, an increase of 0.5 percent over the same period in 2005.
The company’s combined ratio (GAAP basis) was 98.6 percent in the second quarter and 95.3 percent for the first six months of 2006 compared with 90.1 percent and 91.3 perent for the same periods in 2005. 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. The loss development primarily relates 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. As a result of these developments, the Company also increased the implied severity for the 2006 accident year for Florida and New Jersey business. 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 company continues to focus on an initiative embarked in 2005 to standardize its policies and procedures nationwide in all of its functional areas. The company has made significant changes to its Florida and New Jersey operations and believes these and future changes will have a positive impact on its operations.
Net investment income of $36.2 million (after tax $30 million) in the second quarter of 2006 increased by 18.0% over the same period in 2005. The after-tax yield on investment income was 3.7% on average assets of $3.3 billion (fixed maturities and equities at cost) for the quarter. This compares with an after tax yield on investment income of 3.6% on average investments of $3.0 billion (fixed maturities and equities at cost) for the same period in 2005.
The board of directors declared a second quarter dividend of $0.48 per share, representing an 11.6 percent increase over the quarterly dividend amount paid in 2005. The dividend is to be paid on Sept. 28, 2006, to shareholders of record on September 15, 2006. The company’s book value per share at June 30, 2006 was $29.87.
Mercury General 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.
A replay of the call is available through August 15, 2006by calling 800-642-1687 (USA) or 706-645-9291 (International). The conference ID# is 3218288. The replay will also be available on the company’s website as well.
Source: Mercury General
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