SOURCE: Mercer Insurance Group, Inc.
July 29, 2010 16:10 ET
Mercer Insurance Group, Inc. Reports Earnings for the Six Months and Quarter Ended June 30, 2010
PENNINGTON, NJ--(Marketwire - July 29, 2010) - Mercer Insurance Group, Inc. (NASDAQ: MIGP)
reported today its operating results for the six months and quarter ended
June 30, 2010.
2nd Quarter highlights:
-- Net income of $0.59 per diluted share versus $0.60 per diluted share in
the prior year's quarter,
-- Operating income of $0.52 per diluted share versus $0.55 per diluted
share in the prior year's quarter,
-- A GAAP combined ratio of 97.0% versus 97.4% in the prior year's
quarter, and
-- Book value per diluted share of $27.26.
Andrew R. Speaker, President and CEO, noted, "We are pleased that we have
produced consistent overall operating results while facing a difficult
market. The prolonged economic recovery, a price sensitive market-place,
and diminishing investment yields have placed pressure on our results, and
those of the entire property and casualty insurance industry. It is
through a disciplined approach to our business that we continue to achieve
our steady results."
Speaker continued, "Book value increased to $27.26 per share. One of our
primary goals is the steady growth of book value, as it not only supports
our credit ratings but positions us for improvements in the competitive
environment.
"Our direct writings fell by 5.9% for the quarter, and by 2.3%
year-to-date. The decrease has resulted from the combination of continuing
competition for business in the marketplace, and the weakness in the
economy which, particularly in residential construction, has led to reduced
exposures to insure. Many competitors are writing insurance at what we
believe are undisciplined pricing levels which we are unwilling to match.
At the same time, we have successfully introduced a number of new products
in our markets. In our West Coast operations, we have introduced with
success a product geared at the smaller service contractor. In our East
Coast markets we have successfully introduced a waste haulers product and a
garage product. Although we are dissatisfied with the overall decline in
direct writings, we are pleased these new initiatives are being well
received in the marketplace and confident that our disciplined underwriting
will lead to satisfactory results."
Financial Summary (in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
(unaudited) (unaudited)
------------------ ------------------
2010 2009 2010 2009
-------- -------- -------- --------
Total revenue $ 38,016 $ 39,530 $ 77,185 $ 78,722
Net premiums written 37,524 40,326 69,524 72,182
Net premiums earned 33,379 34,952 68,114 70,534
Net investment income 3,499 3,625 7,005 7,228
Net realized gains (losses) on
investments 618 402 1,090 (79)
Net income 3,780 3,750 7,252 6,641
Earnings per share - Basic $ 0.60 $ 0.61 $ 1.16 $ 1.07
Earnings per share - Diluted $ 0.59 $ 0.60 $ 1.13 $ 1.06
Combined ratio 97.0% 97.4% 97.6% 97.9%
Book value per share $ 27.26 $ 23.87
Reconciliation of non-GAAP
financial measures:
Net income $ 3,780 $ 3,750 $ 7,252 $ 6,641
Net realized gains (losses) on
investments, net of tax 408 266 719 (52)
Net operating income 3,372 3,484 6,533 6,693
Operating earnings per share -
Basic $ 0.54 $ 0.56 $ 1.04 $ 1.08
Operating earnings per share -
Diluted $ 0.52 $ 0.55 $ 1.02 $ 1.07
In the quarter ended June 30, 2010, the Company reported GAAP net income
under U.S. generally accepted accounting principles (GAAP) of $3.8 million,
or $0.59 per diluted share, which approximates earnings of the prior year's
quarter which were $0.60 per diluted share. Operating earnings decreased to
$3.4 million from the $3.5 million reported in the prior year's quarter.
The second quarter included after tax development of $0.7 million relating
to losses resulting from catastrophes 94 and 96, which occurred in the
first quarter of 2010.
In the six months ended June 30, 2010, the Company reported GAAP net income
of $7.3 million, or $1.13 per diluted share. This result compares to net
income of $6.6 million, or $1.06 per diluted share, for the same period in
the previous year. Operating earnings decreased to $6.5 million from $6.7
million in the prior year. Included in the six-month results was an after
tax charge of $1.5 million for catastrophes 94 and 96.
The Mercer Insurance Group, Inc. Board of Directors also announced that it
has approved a dividend of $0.10 per share, to be paid on September 27,
2010 to shareholders of record as of September 10, 2010.
Operating income and operating earnings per share are non-GAAP financial
measures that we present because we believe they enhance an investor's
understanding of Mercer's core operating performance. Operating income and
operating earnings per share consist of net earnings adjusted for after-tax
net realized investment gains and losses.
Mercer Insurance Group, Inc. offers commercial and personal lines of
insurance to businesses and individuals principally in seven states through
its insurance subsidiaries: Mercer Insurance Company, Mercer Insurance
Company of New Jersey, Inc., Financial Pacific Insurance Company and
Franklin Insurance Company.
Certain of the statements in this press release (other than statements of
historical facts) are forward-looking statements. Such forward-looking
statements include estimates and assumptions related to economic,
competitive and legislative developments. These
forward-looking statements are subject to change and uncertainty that are,
in many instances, beyond the Company's control and have been made based
upon management's expectations and beliefs concerning future developments
and their potential effect on Mercer Insurance Group, Inc. There can be no
assurance that future developments will be in accordance with management's
expectations. Therefore the effect of future developments on Mercer
Insurance Group, Inc. may be different from that anticipated by management.
Actual financial results including premium growth and underwriting results
could differ materially from those anticipated by Mercer Insurance Group,
Inc. depending on the outcome of certain factors, which may include changes
in property and casualty loss trends and reserves; catastrophe losses; the
insurance product pricing environment; changes in applicable law;
government regulation and changes therein, including those that may impede
the ability to charge adequate rates; changes in accounting principles;
performance of the financial markets; fluctuations in interest rates;
availability and price of reinsurance; and the status of the labor markets
in which the company operates.
Consolidated Statements of Income
(in thousands, except per share and share data)
Quarter Ended
June 30,
2010 2009
(unaudited) (unaudited)
Net premiums earned $ 33,379 $ 34,952
Investment income,
net of investment expenses 3,499 3,625
Realized investment gains 618 402
Other revenue 520 551
Total revenue 38,016 39,530
Losses and loss adjustment expenses 20,754 20,761
Amortization of deferred policy
acquisition costs 9,048 9,598
Other expenses 2,584 3,678
Interest expense 353 356
Total expenses 32,739 34,393
Income before income taxes 5,277 5,137
Income taxes 1,497 1,387
Net income $ 3,780 $ 3,750
Net income per common share:
Basic $ 0.60 $ 0.61
Diluted $ 0.59 $ 0.60
Weighted average number of
shares outstanding:
Basic 6,284,892 6,196,311
Diluted 6,436,567 6,298,438
Supplementary Financial Data
Net written premiums $ 37,524 $ 40,326
Book value per common share $ 27.26 $ 23.87
GAAP combined ratio 97.0% 97.4%
Consolidated Statements of Income
(in thousands, except per share and share data)
Six Months Ended
June 30,
2010 2009
(unaudited) (unaudited)
Net premiums earned $ 68,114 $ 70,534
Investment income,
net of investment expenses 7,005 7,228
Realized investment gains (losses) 1,090 (79)
Other revenue 976 1,039
Total revenue 77,185 78,722
Losses and loss adjustment expenses 42,667 42,960
Amortization of deferred policy
acquisition costs 18,433 19,503
Other expenses 5,348 6,569
Interest expense 704 708
Total expenses 67,152 69,740
Income before income taxes 10,033 8,982
Income taxes 2,781 2,341
Net income $ 7,252 $ 6,641
Net income per common share:
Basic $ 1.16 $ 1.07
Diluted $ 1.13 $ 1.06
Weighted average number of
shares outstanding:
Basic 6,272,131 6,188,313
Diluted 6,424,958 6,262,612
Supplementary Financial Data
Net written premiums $ 69,524 $ 72,182
GAAP combined ratio 97.6% 97.9%
Consolidated Balance Sheet
(in thousands, except share amounts)
June 30,
2010 December 31,
(unaudited) 2009
ASSETS
Investments, at fair value:
Fixed income securities, available-for sale $ 389,012 $ 365,464
Equity securities, at fair value 8,402 9,484
Short-term investments, at cost, which
approximates fair value 12,999 -
Total investments 410,413 374,948
Cash and cash equivalents 16,461 39,927
Premiums receivable 42,472 36,405
Reinsurance receivable 74,780 79,599
Prepaid reinsurance premiums 6,537 5,871
Deferred policy acquisition costs 19,066 18,876
Accrued investment income 4,271 4,287
Property and equipment, net 20,733 21,516
Deferred income taxes 2,844 4,941
Goodwill 5,416 5,416
Other assets 4,448 3,568
Total assets $ 607,441 $ 595,354
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Losses and loss adjustment expenses $ 309,167 $ 311,348
Unearned premiums 78,676 76,601
Accounts payable and accrued expenses 9,821 12,150
Other reinsurance balances 14,515 12,386
Trust preferred securities 15,601 15,592
Advances under line of credit 3,000 3,000
Other liabilities 5,013 4,069
Total liabilities $ 435,793 $ 435,146
Stockholders' Equity:
Preferred Stock, no par value, authorized
5,000,000 shares, no shares issued and
outstanding - -
Common stock, no par value,
authorized 15,000,000 shares, issued
7,086,833 and 7,074,333 shares, outstanding
6,928,046 and 6,883,498 shares - -
Additional paid-in capital $ 72,603 $ 72,139
Accumulated other comprehensive income 16,735 12,220
Retained earnings 92,257 86,101
Unearned ESOP shares (1,568) (1,878)
Treasury Stock, 632,391 and 632,076 shares (8,379) (8,374)
Total stockholders' equity 171,648 160,208
Total liabilities and stockholders' equity $ 607,441 $ 595,354