Mercury General Corporation Announces Fourth Quarter Results and Declares Quarterly Dividend

  Mercury General Corporation Announces Fourth Quarter Results and Declares
                              Quarterly Dividend

PR Newswire

LOS ANGELES, Feb. 4, 2013

LOS ANGELES, Feb. 4, 2013 /PRNewswire/ -- Mercury General Corporation (NYSE:
MCY) reported today for the fourth quarter of 2012:



Consolidated Highlights
            Three Months Ended       Change             Twelve Months Ended         Change
            December 31,                                December 31,
            2012         2011        $           %      2012          2011          $           %
(000's
except
per-share
amounts and
ratios)
Net
premiums    $ 654,931    $ 618,593   $ 36,338    5.9    $ 2,651,731   $ 2,575,383   $ 76,348    3.0
written (1)
Net (loss)  $ (17,382)   $ 79,469    $ (96,851)  NM     $ 116,911     $ 191,164     $ (74,253)  (38.8)
income
Net (loss)
income per  $ (0.32)     $ 1.45      $ (1.77)    NM     $ 2.13        $ 3.49        $ (1.36)    (39.0)
diluted
share (2)
Operating
(loss)      $ (9,403)    $ 32,109    $ (41,512)  NM     $ 73,764      $ 153,206     $ (79,442)  (51.9)
income (1)
Operating
(loss)
income per  $ (0.17)     $ 0.59      $ (0.76)    NM     $ 1.34        $ 2.79        $ (1.45)    (52.0)
diluted
share (1)
Catastrophe $ 28,000     $ 10,000    $ 18,000    180.0  $ 39,000      $ 18,000      $ 21,000    116.7
losses (3)
Combined    109.8      % 99.4      % —           10.4   102.8       % 98.5        % —           4.3 pts
ratio (4)                                        pts
NM = Not
meaningful

    These measures are not based on U.S. generally accepted accounting
(1) principles ("GAAP") and are defined and reconciled to the most directly
    comparable GAAP measures in "Information Regarding Non-GAAP Measures."
(2) The dilutive impact of incremental shares is excluded from loss positions
    in accordance with GAAP.
    2012 catastrophe losses were primarily the result of wind and hail storms
    in the Midwest region in the second quarter and Hurricane Sandy in the
(3) fourth quarter; 2011 catastrophe losses were mainly the result of
    Hurricane Irene in the third quarter and severe windstorms in California
    in the fourth quarter. The amounts are rounded to the nearest million.
    The Company experienced unfavorable development of approximately $9
    million and $7 million on prior accident years' losses and loss adjustment
    expenses reserves for the three months ended December 31, 2012 and 2011,
    respectively; and approximately $42 million and $18 million on prior
(4) accident years' losses and loss adjustment expenses reserves for the year
    ended December 31, 2012 and 2011, respectively. The year-to-date
    unfavorable development for the twelve months ended December 31, 2012 is
    largely the result of re-estimates of California bodily injury losses
    which have experienced higher average severities and more late reported
    claims (claim count development) than estimated at December 31, 2011.



Investment Results
                      Three Months Ended           Twelve Months Ended
                      December 31,                 December 31,
                      2012          2011           2012          2011
(000's except average
annual yield)
Average invested      $ 3,040,026   $ 2,984,386    $ 3,011,143   $ 3,004,588
assets at cost ^(1)
Net investment income
^(2)
Before income taxes   $ 35,327      $ 34,316       $ 131,896     $ 140,947
After income taxes    $ 30,450      $ 30,225       $ 115,359     $ 124,708
Average annual yield
on investments -      4.0         % 4.1         %  3.8         % 4.2         %
after income taxes
^(2)

    Fixed maturities and short-term bonds at amortized cost and equities and
(1) other short-term investments at cost. Average invested assets at cost is
    based on the monthly amortized cost of the invested assets for each
    respective period.
    Net investment income and average annual yield for the twelve months ended
    December 31, 2012 decreased primarily due to the maturity and replacement
(2) of higher yielding investments, purchased when market interest rates were
    higher, with lower yielding investments purchased during the current low
    interest rate environment.

Mercury CEO and President Gabe Tirador commented on the quarterly results:

"The fourth quarter was adversely impacted by $28 million of catastrophe
losses from Hurricane Sandy, high seasonal loss frequency and increased loss
severity in California, and adverse reserve development of $9 million.
Hurricane Sandy losses came predominantly from the homeowners business in New
York; however, auto losses in New Jersey and New York also accounted for
approximately $6 million of the total Hurricane Sandy losses. The Company has
historically experienced high California loss frequency in the fourth quarter
due to severe weather and increased driving. Fourth quarter frequency in 2012
was worse than most previous years.

During the quarter, the Company made progress in many operational areas.
Operations outside of California continued to improve and, excluding the
losses from Hurricane Sandy, posted a combined ratio under 100%. Premium
growth improved to 5.9%, its highest level since the first quarter of 2006.
Recent premium growth was driven primarily by the California personal
automobile line of business which had a 24% increase in new policy sales
compared to the fourth quarter of 2011 and a 4% rate increase that was
implemented on October 26, 2012.

On January 22, 2013, the Company implemented a plan to consolidate its
operations outside of California into hubs located in Florida, New Jersey, and
Texas. Management expects the consolidation to be complete before the end of
the second quarter. Our office based claims and underwriting operations
outside of California will be performed in these hubs. We believe that the hub
structure will lead to improved efficiencies and better position the Company
for future growth. As a result of the plan, the Company will incur pre-tax
restructuring charges of approximately $8 million to $13 million in the first
quarter of 2013 and expects annual recurring pre-tax savings of approximately
$13 million."

The Board of Directors declared a quarterly dividend of $0.6125 per share. The
dividend will be paid on March 28, 2013 to shareholders of record on March 14,
2013.

Mercury General Corporation 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 the Company's website at www.mercuryinsurance.com. The
Company will be hosting a conference call and webcast today at 10:00 A.M.
Pacific time where management will discuss results and address questions. The
teleconference and webcast can be accessed by calling (877) 807-1888 (USA),
(706) 679-3827 (International) or by visiting www.mercuryinsurance.com. A
replay of the call will be available beginning at 1:30 P.M. Pacific time and
running through February 11, 2013. The replay telephone numbers are (855)
859-2056 (USA) or (404) 537-3406 (International). The conference ID# is
88026983. The replay will also be available on the Company's website shortly
following the call.

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for certain forward-looking statements. The statements contained in this press
release are forward-looking statements based on the Company's current
expectations and beliefs concerning future developments and their potential
effects on the Company. There can be no assurance that future developments
affecting the Company will be those anticipated by the Company. Actual results
may differ from those projected in the forward-looking statements. These
forward-looking statements involve significant risks and uncertainties (some
of which are beyond the control of the Company) and are subject to change
based upon various factors, including but not limited to the following risks
and uncertainties: changes in the demand for the Company's insurance products,
inflation and general economic conditions, including the impact of current
economic conditions on the Company's market and investment portfolio; the
accuracy and adequacy of the Company's pricing methodologies; adverse weather
conditions or natural disasters in the markets served by the Company; general
market risks associated with the Company's investment portfolio; uncertainties
related to estimates, assumptions and projections generally; the possibility
that actual loss experience may vary adversely from the actuarial estimates
made to determine the Company's loss reserves in general; the Company's
ability to obtain and the timing of the approval of premium rate changes for
insurance policies issued in states where the Company operates; legislation
adverse to the automobile insurance industry or business generally that may be
enacted in the states where the Company operates; the Company's success in
managing its business in states outside of California; the presence of
competitors with greater financial resources and the impact of competitive
pricing and marketing efforts; changes in driving patterns and loss trends;
acts of war and terrorist activities; court decisions and trends in litigation
and health care and auto repair costs and marketing efforts; and legal,
regulatory and litigation risks. The Company undertakes no obligation to
publicly update or revise any forward-looking statements, whether as the
result of new information, future events or otherwise. For a more detailed
discussion of some of the foregoing risks and uncertainties, see the Company's
filings with the Securities and Exchange Commission.



MERCURY GENERAL CORPORATION AND SUBSIDIARIES

SUMMARY OF OPERATING RESULTS

(000's except per-share amounts and ratios)

(unaudited)
                     Three Months Ended December  Twelve Months Ended December
                     31,                          31,
                     2012            2011         2012           2011
Net premiums written $  654,931      $ 618,593    $ 2,651,731    $ 2,575,383
Revenues:
Net premium earned   $  655,777      $ 641,613    $ 2,574,920    $ 2,566,057
Net investment       35,327          34,316       131,896        140,947
income
 Net realized
investment (losses)  (12,276)        72,862       66,380         58,397
gains
Other                2,384           663          10,174         11,884
Total revenues       $  681,212      $ 749,454    $ 2,783,370    $ 2,777,285
Expenses:
Losses and loss      546,352         472,876      1,961,448      1,829,205
adjustment expenses
Policy acquisition   120,726         116,072      477,788        481,721
costs
Other operating      52,928          48,914       207,281        215,711
expenses
Interest             367             899          1,543          5,549
Total expenses       $  720,373      $ 638,761    $ 2,648,060    $ 2,532,186
(Loss) income before (39,161)        110,693      135,310        245,099
income taxes
 Income tax      (21,779)        31,224       18,399         53,935
(benefit) expense
Net    $  (17,382)     $ 79,469     $ 116,911      $ 191,164
(loss) income
Basic average shares 54,914          54,845       54,899         54,825
outstanding
Diluted average
shares outstanding ^ 54,914          54,873       54,922         54,845
(a)
Basic Per Share Data
Net (loss) income    $  (0.32)       $ 1.45       $ 2.13         $ 3.49
Net realized
investment (losses)  $  (0.15)       $ 0.86       $ 0.79         $ 0.69
gains, net of tax
Diluted Per Share
Data ^(a)
Net (loss) income    $  (0.32)       $ 1.45       $ 2.13         $ 3.49
Net realized
investment (losses)  $  (0.15)       $ 0.86       $ 0.79         $ 0.69
gains, net of tax
Operating
Ratios-GAAP Basis
Loss ratio           83.3         %  73.7      %  76.2        %  71.3        %
Expense ratio        26.5         %  25.7      %  26.6        %  27.2        %
Combined ratio       109.8        %  99.4      %  102.8       %  98.5        %
Reconciliations of Operating Measures to Comparable GAAP
Measures
Net premiums written $  654,931      $ 618,593    $ 2,651,731    $ 2,575,383
Change in net        846             23,020       (76,811)       (9,326)
unearned premiums
Net premiums earned  $  655,777      $ 641,613    $ 2,574,920    $ 2,566,057
Paid losses and loss $  493,760      $ 467,581    $ 1,914,838    $ 1,879,247
adjustment expenses
Change in net loss
and loss adjustment  52,592          5,295        46,610         (50,042)
expense reserves
Incurred losses and
loss adjustment      $  546,352      $ 472,876    $ 1,961,448    $ 1,829,205
expenses

(a) The dilutive impact of incremental shares is excluded from loss position
    in accordance with GAAP.



MERCURY GENERAL CORPORATION AND SUBSIDIARIES

CONDENSED BALANCE SHEETS AND OTHER INFORMATION

(000's except per-share amounts and ratios)
                                          December31, 2012  December31, 2011
                                          (unaudited)
ASSETS
Investments, at fair value:
 Fixed maturity securities (amortized $   2,408,354      $   2,445,589
cost $2,270,903; $2,345,620)
 Equity securities (cost $475,959;    477,088            380,388
$388,417)
 Short-term investments (cost         294,653            236,444
$294,607; $236,433)
Total investments                         3,180,095          3,062,421
Cash                                      158,183            211,393
Receivables:
Premiums                                  345,387            288,799
Accrued investment income                 31,109             32,541
Other                                     17,756             11,320
Total receivables                         394,252            332,660
Deferred policy acquisition costs         185,910            171,430
Fixed assets, net                         161,940            177,760
Current income taxes                      7,058              0
Deferred income taxes                     0                  6,511
Goodwill                                  42,796             42,850
Other intangible assets, net              47,589             53,749
Other assets                              11,863             11,232
Total assets                              $   4,189,686      $   4,070,006
LIABILITIES AND SHAREHOLDERS' EQUITY
Losses and loss adjustment expenses       $   1,036,123      $   985,279
Unearned premiums                         920,429            843,427
Notes payable                             140,000            140,000
Accounts payable and accrued expenses     96,220             94,743
Current income taxes                      0                  67
Deferred income taxes                     445                0
Other liabilities                         153,972            149,007
Shareholders' equity                      1,842,497          1,857,483
Total liabilities and shareholders'       $   4,189,686      $   4,070,006
equity
OTHER INFORMATION
Common stock shares outstanding           54,922             54,856
Book value per share                      $33.55             $33.86
Estimated statutory surplus               $1.44 billion      $1.50 billion
Estimated premiums written to surplus     1.8                1.7
ratio
Debt to total capital ratio               7.1            %   7.0            %
Portfolio duration (including all         2.8 years          3.3 years
short-term instruments)^(a)
Policies-in-force (company-wide
"PIF")^(a)
Personal Auto PIF                         1,249              1,236
Homeowners PIF                            442                394

(a) Unaudited.



Information Regarding Non-GAAP Measures

The Company has presented information within this document containing
operating measures which in management's opinion provide investors with
useful, industry specific information to help them evaluate, and perform
meaningful comparisons of, the Company's performance, but that may not be
presented in accordance with GAAP. These measures are not intended to replace,
and should be read in conjunction with, the GAAP financial results.

Operating income is net income excluding realized investment gains and losses,
net of tax. Net income is the GAAP measure that is most directly comparable to
operating income. Operating income is used by management along with the other
components of net income to assess the Company's performance. Management uses
operating income as an important measure to evaluate the results of the
Company's insurance business. Management believes that operating income
provides investors with a valuable measure of the Company's ongoing
performance as it reveals trends in the Company's insurance business that may
be obscured by the effect of net realized capital gains and losses. Realized
capital gains and losses may vary significantly between periods and are
generally driven by external economic developments such as capital market
conditions. Accordingly, operating income highlights the results from ongoing
operations and the underlying profitability of the Company's core insurance
business. Operating income, which is provided as supplemental information and
should not be considered as a substitute for net income, does not reflect the
overall profitability of our business. It should be read in conjunction with
the GAAP financial results. The Company has reconciled operating income with
the most directly comparable GAAP measure in the table below.



           Three Months Ended December 31,          Twelve Months Ended December 31,
           Total                 Per diluted share  Total                 Per diluted
                                                                          share
           2012        2011      2012 ^(b) 2011     2012       2011       2012    2011
                                                                                  ^(a)
(000's
except
per-share
amounts)
Operating
(loss)     $ (9,403)   $ 32,109  $ (0.17)  $ 0.59   $ 73,764   $ 153,206  $ 1.34  $ 2.79
income
Net
realized
investment (7,979)     47,360    (0.15)    0.86     43,147     37,958     0.79    0.69
(losses)
gains, net
of tax
Net (loss) $ (17,382)  $ 79,469  $ (0.32)  $ 1.45   $ 116,911  $ 191,164  $ 2.13  $ 3.49
income

(a) Net income per diluted share does not sum due to rounding.
(b) The dilutive impact of incremental shares is excluded from loss positions
    in accordance with GAAP.



Net premiums written represents the premiums charged on policies issued during
a fiscal period. Net premiums earned, the most directly comparable GAAP
measure, represents the portion of premiums written that have been recognized
as income in the financial statements for the periods presented as earned on a
pro-rata basis over the term of the policies. Net premiums written are meant
as supplemental information and are not intended to replace net premiums
earned. Such information should be read in conjunction with the GAAP financial
results. The Company has reconciled net premiums written with the most
directly comparable GAAP measure in the supplemental schedule entitled,
"Summary of Operating Results."

Paid losses and loss adjustment expenses is the portion of incurred losses and
loss adjustment expenses, the most directly comparable GAAP measure, excluding
the effects of changes in the loss reserve accounts. Paid losses and loss
adjustment expenses is provided as supplemental information and is not
intended to replace incurred losses and loss adjustment expenses. It should be
read in conjunction with the GAAP financial results. The Company has
reconciled paid losses and loss adjustment expenses with the most directly
comparable GAAP measure in the supplemental schedule entitled, "Summary of
Operating Results."

Combined ratio-accident period basis is computed as the difference between two
GAAP operating ratios: the combined ratio and the effect of prior accident
periods' loss development. The most directly comparable GAAP measure is the
combined ratio. The Company believes that this ratio is useful to investors
and it is used by management to reveal the trends in the Company's results of
operations that may be obscured by development on prior accident periods' loss
reserves. Combined ratio-accident period basis is meant as supplemental
information and is not intended to replace combined ratio. It should be read
in conjunction with the GAAP financial results. The Company has reconciled
combined ratio-accident period basis with the most directly comparable GAAP
measure in the table below.



                                              Twelve Months Ended December 31,
                                              2012                2011
Combined ratio-accident period basis          101.2     %         97.8    %
Effect of estimated prior periods' loss       1.6       %         0.7     %
development
Combined ratio                                102.8     %         98.5    %



SOURCE Mercury General Corporation

Website: http://www.mercuryinsurance.com
Contact: Theodore Stalick, VP/CFO, +1-323-937-1060, www.mercuryinsurance.com