MERCURY GENERAL CORP. REPORTS FIRST QUARTER RESULTS
MERCURY GENERAL CORP. REPORTS FIRST QUARTER RESULTS LOS ANGELES, May 6 /PRNewswire/ -- Mercury General Corp.
(NASDAQ: MRCY), a major California automobile insurer, reported today that net income for the quarter ended March 31, 1992 was $18.2 million, or $1.34 per share, compared with $14.9 million, or $1.10 per share, in the first quarter of 1991. Realized capital gains contributed $.05 to 1992 per share results, compared with $.03 per share in 1991. Per share results are based on 13.6 million average shares in 1992 and 13.5 million shares in 1991.
First quarter results in both 1992 and 1991 were reduced by $.03 per share as the result of provisions for interest on potential rate refunds under Proposition 103, the 1988 California insurance initiative which mandated one-time insurance rate "rollbacks" for the period Nov. 9, 1988 to Nov. 8, 1989. The California Department of Insurance (DOI) has issued "rollback" orders to fourteen California insurers, including the company, totaling more than $1.5 billion. The order issued to Mercury, as recently amended, amounts to $74.4 million, including interest of $16.9 million calculated at 10 percent from May 8, 1989 to April 15, 1992. The principal amount of the "rollback" asserted by the DOI is $57.5 million, which is some $4.8 million greater than the company's pre-tax statutory income in the 1989 "rollback" period. Mercury believes the order and supporting DOI regulations violate the principles articulated by the California Supreme Court in Calfarm (the decision upholding Proposition 103) and is unconstitutionally confiscatory. The company is vigorously contesting the entire amount of the refund order in an administrative proceeding and will pursue all available legal remedies in the courts. Shareholders' equity of $291.6 million, or $21.43 per share, at March 31, 1992, has been expressed net of a provision for the one-time potential "rollback" liability of $25.5 million, an amount the company believes is adequate to reflect any adverse court determination of the numerous, complex issues related to the question of what constitutes a "fair return" during the 1989 "rollback" period. Underwriting results in the first quarter were outstanding. The combined ratio of losses and expenses to premiums earned (GAAP basis) was 91.9 percent, compared with 95.4 percent in the 1991 first quarter. The loss ratio of 68.8 percent represented year-to-year improvement of 3.0 points, reflecting favorable frequency and severity experience despite heavy rains in the first quarter in Southern California. Underwriting expenses remained under excellent control, with the expense ratio declining to 23.1percent from 23.6 percent in the first quarter of 1991. Premiums written in the first quarter declined by 2.7 percent to $116.4 million. Although the renewal rate continues to exceed 90 percent, new business and total premium volume have undergone some erosion since the first quarter of 1991, when the company's rating factor plan, developed in compliance with DOI regulations, became effective. Under the DOI approved classification plan, rates for certain classes of drivers, particularly young, single males and females, were increased, in some cases significantly; for such classifications, the company is not as competitive as it had been previously. On April 21, 1992, the company filed a revised rating classification plan designed to be revenue-neutral in conformance with DOI regulations. The plan, subject to DOI approval, will make rates for single drivers much more competitive. Investment income in the first quarter increased 5.1 percent to $13.7 million, equal, after taxes, to $.87 per share. A year ago, per share after tax investment income was $.81 per share. On May 1, 1992, the Board of Directors declared a regular $.25 quarterly dividend payable on June 30, 1992, to stockholders of record on June 15, 1992. MERCURY GENERAL CORP. Summary of Operating Results (000) Quarter Ended March 31, 1992 1991 Net Premiums Written $116,413 $119,699 Net Premiums Earned 114,547 120,433 Net Investment Income 13,668 13,010 Provision for Potential Refund, 500 533 Net Operating Income (a) 17,587 14,534 Capital Gains, Net of Tax 634 376 Net Income $18,221 $14,910 Average Shares Outstanding 13,601,091 13,521,289 Per Share Data Net Operating Income $1.29 $1.07 Capital Gains, Net of Tax $0.05 $0.03 Earnings Per Share $1.34 $1.10 Operating Ratios--GAAP Basis (b) Loss Ratio 68.8 pct. 71.8 pct. Expense Ratio 23.1 pct. 23.6 pct. Combined Ratio (c) 91.9 pct. 95.4 pct. (a) Net Income, excluding capital gains (b) Generally Accepted Accounting Principles (c) Excludes provision for potential rate refund in all periods. -0- 5/6/92 /CONTACT: Keith L. Parker, CFO of Mercury General, 213-937-1060/ (MRCY) CO: Mercury General Corp. ST: California IN: INS SU: ERN
EH-JL -- LA007 -- 6905 05/06/92 08:47 EDT
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|Date:||May 6, 1992|
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