Mercury General Corp. (MCY, Financial) filed Quarterly Report for the period ended 2009-06-30.
Mercury General Corp. is engaged primarily in writing all risk classifications of automobile insurance in a number of states principallyCalifornia. The company offers automobile policyholders the following types of coverage: bodily injury liability underinsured and uninsured motorist property damage liability comprehensive collision and other hazards specified in the policy. Mercury General Corp. has a market cap of $2.03 billion; its shares were traded at around $36.99 with a P/E ratio of 19.2 and P/S ratio of 0.7. The dividend yield of Mercury General Corp. stocks is 6.3%. Mercury General Corp. had an annual average earning growth of 31.1% over the past 10 years. GuruFocus rated Mercury General Corp. the business predictability rank of 2.5-star.
The combined ratio of losses and expenses is the key measure of underwriting performance traditionally used in the property and casualty insurance industry. A combined ratio under 100% generally reflects profitable underwriting results; and a combined ratio over 100% generally reflects unprofitable underwriting results. The Companys underwriting performance contributed approximately $26 million of income (approximately $5 million of loss when excluding prior accident periods reserve development) and approximately $21 million of income (approximately $30 million of income when excluding prior accident periods reserve development) to the Companys results of operations before income tax expense for the three-month periods ended June 30, 2009 and 2008, respectively.
The combined ratio of losses and expenses is the key measure of underwriting performance traditionally used in the property and casualty insurance industry. A combined ratio under 100% generally reflects profitable underwriting results; and a combined ratio over 100% generally reflects unprofitable underwriting results. The Companys underwriting performance contributed approximately $47 million of income (approximately $9 million of income when excluding prior accident periods reserve development) and approximately $54 million of income (approximately $71 million of income when excluding prior accident periods reserve development) to the Companys results of operations before income tax expense for the six-month periods ended June 30, 2009 and 2008, respectively.
To improve profitability, during the three-month period ended March 31, 2009, the Company implemented several cost reduction programs, including a salary freeze, a suspension of the employee 401(k) matching program, and a workforce reduction of approximately 360 employees (7% of workforce) primarily located in California. As a result of the workforce reduction, an $8 million expense was recorded ($5 million to losses and loss adjustment expenses, $3 million to other operating expenses) during the three-month period ended March 31, 2009. The annualized cost savings from these cost reduction programs are expected to be over $20 million, which began to be realized in the three-month period ended June 30, 2009.
Included in net income are net realized investment gains of $181.2 million for the six-month period ended June 30, 2009 compared with net realized investment losses of $55.6 million for the six-month period ended June 30, 2008. Net realized investment gains include gains of $214.4 million for the six-month period ended June 30, 2009 due to changes in the fair value of total investments measured at fair value pursuant to SFAS No. 159 compared with losses of $70.7 million for the six-month period ended June 30, 2008. The gains during the six-month period ended June 30, 2009 arise from the market value improvements on the Companys fixed maturity and equity securities. During the six-month period ended June 30, 2009, the Company recorded approximately $147.4 million and $66.9 million in gains due to changes in the fair value of its fixed maturity portfolio and equity portfolio, respectively. The primary cause of the significant gains in the Companys equity portfolio was due to the large allocation to energy related stocks. Energy related stocks experienced a significant growth in value more than that of the overall stock market, which saw a slight growth of approximately 1.8% in the S&P 500 Index.
Net cash provided from operating activities in the six-month period ended June 30, 2009 was $106.4 million, an increase of $93.4 million over the corresponding period in 2008. This increase was primarily due to additional operating cash flows from AIS and a decrease in losses and loss adjustment expenses paid during the six-month period ended June 30, 2009 compared with the corresponding period in 2008. The Company has utilized the cash provided from operating activities primarily for the development of information technology such as the NextGen and Mercury First computer systems and the payment of dividends to its shareholders. Funds derived from the sale, redemption or maturity of fixed maturity investments of $235.0 million, were primarily reinvested by the Company in high grade fixed maturity securities.
Read the The complete ReportMCY is in the portfolios of Robert Rodriguez of FPA Capital, Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC, Richard Aster Jr of Meridian Fund, Richard Aster Jr of Meridian Fund, NWQ Managers of NWQ Investment Management Co.
Mercury General Corp. is engaged primarily in writing all risk classifications of automobile insurance in a number of states principallyCalifornia. The company offers automobile policyholders the following types of coverage: bodily injury liability underinsured and uninsured motorist property damage liability comprehensive collision and other hazards specified in the policy. Mercury General Corp. has a market cap of $2.03 billion; its shares were traded at around $36.99 with a P/E ratio of 19.2 and P/S ratio of 0.7. The dividend yield of Mercury General Corp. stocks is 6.3%. Mercury General Corp. had an annual average earning growth of 31.1% over the past 10 years. GuruFocus rated Mercury General Corp. the business predictability rank of 2.5-star.
Highlight of Business Operations:
The Companys operating results have allowed it to consistently generate positive cash flow from operations, which was approximately $106.4 million and $12.9 million for the six-month periods ended June 30, 2009 and 2008, respectively. Cash flow from operations has historically been used to pay shareholder dividends and to help support growth.The combined ratio of losses and expenses is the key measure of underwriting performance traditionally used in the property and casualty insurance industry. A combined ratio under 100% generally reflects profitable underwriting results; and a combined ratio over 100% generally reflects unprofitable underwriting results. The Companys underwriting performance contributed approximately $26 million of income (approximately $5 million of loss when excluding prior accident periods reserve development) and approximately $21 million of income (approximately $30 million of income when excluding prior accident periods reserve development) to the Companys results of operations before income tax expense for the three-month periods ended June 30, 2009 and 2008, respectively.
The combined ratio of losses and expenses is the key measure of underwriting performance traditionally used in the property and casualty insurance industry. A combined ratio under 100% generally reflects profitable underwriting results; and a combined ratio over 100% generally reflects unprofitable underwriting results. The Companys underwriting performance contributed approximately $47 million of income (approximately $9 million of income when excluding prior accident periods reserve development) and approximately $54 million of income (approximately $71 million of income when excluding prior accident periods reserve development) to the Companys results of operations before income tax expense for the six-month periods ended June 30, 2009 and 2008, respectively.
To improve profitability, during the three-month period ended March 31, 2009, the Company implemented several cost reduction programs, including a salary freeze, a suspension of the employee 401(k) matching program, and a workforce reduction of approximately 360 employees (7% of workforce) primarily located in California. As a result of the workforce reduction, an $8 million expense was recorded ($5 million to losses and loss adjustment expenses, $3 million to other operating expenses) during the three-month period ended March 31, 2009. The annualized cost savings from these cost reduction programs are expected to be over $20 million, which began to be realized in the three-month period ended June 30, 2009.
Included in net income are net realized investment gains of $181.2 million for the six-month period ended June 30, 2009 compared with net realized investment losses of $55.6 million for the six-month period ended June 30, 2008. Net realized investment gains include gains of $214.4 million for the six-month period ended June 30, 2009 due to changes in the fair value of total investments measured at fair value pursuant to SFAS No. 159 compared with losses of $70.7 million for the six-month period ended June 30, 2008. The gains during the six-month period ended June 30, 2009 arise from the market value improvements on the Companys fixed maturity and equity securities. During the six-month period ended June 30, 2009, the Company recorded approximately $147.4 million and $66.9 million in gains due to changes in the fair value of its fixed maturity portfolio and equity portfolio, respectively. The primary cause of the significant gains in the Companys equity portfolio was due to the large allocation to energy related stocks. Energy related stocks experienced a significant growth in value more than that of the overall stock market, which saw a slight growth of approximately 1.8% in the S&P 500 Index.
Net cash provided from operating activities in the six-month period ended June 30, 2009 was $106.4 million, an increase of $93.4 million over the corresponding period in 2008. This increase was primarily due to additional operating cash flows from AIS and a decrease in losses and loss adjustment expenses paid during the six-month period ended June 30, 2009 compared with the corresponding period in 2008. The Company has utilized the cash provided from operating activities primarily for the development of information technology such as the NextGen and Mercury First computer systems and the payment of dividends to its shareholders. Funds derived from the sale, redemption or maturity of fixed maturity investments of $235.0 million, were primarily reinvested by the Company in high grade fixed maturity securities.
Read the The complete ReportMCY is in the portfolios of Robert Rodriguez of FPA Capital, Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC, Richard Aster Jr of Meridian Fund, Richard Aster Jr of Meridian Fund, NWQ Managers of NWQ Investment Management Co.
