LOS ANGELES, Feb. 9 /PRNewswire-FirstCall/ -- Mercury General Corporation (NYSE: MCY) reported today for the fourth quarter of 2008:
Consolidated Highlights
Three Months Ended
December 31, Change
------
2008 2007 $ %
---- ---- - -
(000's except per-share
amounts and ratios)
Net premiums written (1) $641,641 $699,898 $(58,257) (8.3)
Net income (loss) (168,345) 44,592 (212,937) (477.5)
Net income (loss) per
diluted share (2) (3.07) 0.81 (3.88) (479.0)
Operating income (loss)
(1) (26,706) 38,214 (64,920) (169.9)
Operating income (loss)
per diluted share (1) (0.48) 0.69 (1.17) (169.6)
Adverse development on
prior periods' loss
reserves (3) (33,000) (13,000) (20,000) --
Combined ratio 113.4% 98.8% -- 14.6 pts
Combined ratio-accident
period basis (1) 108.5% 97.0% -- 11.5 pts
Twelve Months Ended
December 31, Change
------
2008 2007 $ %
---- ---- - -
(000's except per-share
amounts and ratios)
Net premiums written (1) $2,750,226 $2,982,024 $(231,798) (7.8)
Net income (loss) (242,119) 237,832 (479,951) (201.8)
Net income (loss) per
diluted share (2) (4.42) 4.34 (8.76) (201.8)
Operating income (loss)
(1) 115,719 224,307 (108,588) (48.4)
Operating income (loss)
per diluted share (1) 2.12 4.09 (1.97) (48.2)
Adverse development on
prior periods' loss
reserves (3) (83,000) (19,000) (64,000) --
Combined ratio 101.8% 95.4% -- 6.4 pts
Combined ratio-accident
period basis (1) 98.8% 94.8% -- 4.0 pts
(1) These measures are not based on U.S. generally accepted
accounting 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 2008 in accordance with GAAP.
(3) The amounts are estimated and rounded to the nearest million.
Net loss in the fourth quarter 2008 was $168.3 million ($3.07 per share) compared with net income of $44.6 million ($0.81 per share-diluted) for the same period in 2007. For the year, net loss was $242.1 million ($4.42 per share) compared to net income of $237.8 million ($4.34 per share-diluted) for the same period in 2007. Included in net income (loss) are net realized investment losses, net of tax, of $141.6 million ($2.59 per share) in the fourth quarter of 2008 compared with net realized investment gains, net of tax, of $6.4 million ($0.12 per share-diluted) for the same period in 2007, and net realized investment losses, net of tax, of $357.8 million ($6.54 per share) for the year compared to net realized investment gains, net of tax, of $13.5 million ($0.25 per share-diluted) for the same period in 2007. Operating loss was $26.7 million ($0.48 per share) for the fourth quarter of 2008, down 169.9% from the same period in 2007. For the year, operating income was $115.7 million ($2.12 per share), down 48.4% from the same period in 2007.
Net realized investment losses, net of tax, of $141.6 million in the fourth quarter of 2008 and net realized investment losses, net of tax, of $357.8 million for the year include losses, net of tax, of $121.3 million and $341.7 million, respectively, due to adoption of SFAS No. 159, 'The Fair Value Option for Financial Assets and Financial Liabilities,' for the entire investment portfolio on January 1, 2008. As a result of this adoption, changes in unrealized gains and losses on all investments that were previously recorded as changes to accumulated other comprehensive income on the balance sheet are now recorded as realized gains and losses on the statement of operations. The declines in the market value of our fixed income and equity portfolios resulted from asset sell-off's in the broader capital markets as a result of economic factors that have triggered a deep recession in the U.S. and World economies.
Company-wide net premiums written were $641.6 million in the fourth quarter 2008, an 8.3% decrease over the fourth quarter 2007 net premiums written of $699.9 million, and were approximately $2.8 billion for the year, a 7.8% decrease over the same period in 2007. California net premiums written were $506.0 million in the fourth quarter of 2008, a decrease of 7.6% over the same period in 2007, and were approximately $2.2 billion for the year, a 6.2% decrease over the same period in 2007. Non-California net premiums written were $135.6 million in the fourth quarter of 2008, a 10.8% decrease over the same period in 2007, and were $589.0 million for the year, a decrease of 13.1% over the same period in 2007.
Losses incurred during the fourth quarter 2008 were impacted by approximately $20 million of losses related to the Southern California wildfires occurring in October 2008, high loss severity inflation on the California automobile lines of business, adverse development on prior periods loss reserves and poor results from our New Jersey operations.
Net investment income of $34.9 million (after tax $31.5 million) in the fourth quarter of 2008 decreased by 5.0% over the same period in 2007. The after-tax yield on investment income was 3.7% on average investments of $3.4 billion (fixed maturities, equities and short-term investments at cost) for the quarter. This compares with an after-tax yield on investment income of 3.8% on average investments of $3.5 billion (fixed maturities, equities and short-term investments at cost) for the same period in 2007. Net investment income for the year was $151.3 million (after tax $133.7 million), a decrease of 4.8% over the same period in 2007. The after-tax yield on investment income was 3.9% on average assets of $3.5 billion (fixed maturities, equities and short-term investments at cost) for the year, compared with an after-tax yield on investment income of 4.0% on average investments of $3.5 billion (fixed maturities, equities and short-term investments at cost) for the same period in 2007.
The Board of Directors declared a quarterly dividend of $0.58 per share. The dividend is to be paid on March 31, 2009 to shareholders of record on March 16, 2009.
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.
