Mercury Posts Lower Q1
Los Angeles-based Mercury General Corp. reported slightly lower net income for the first quarter of 2006 —$58.6 million, or $1.07 per share (diluted), compared with $60.4 million, or $1.10 per share (diluted), in Q1 2005.
It noted the figure includes realized investment gains, net of tax, of $4.2 million, or $0.08 per share (diluted), in Q1 of 2006, compared with net realized investment gains, net of tax, of $2.7 million, or $0.05 per share (diluted), for Q1 in 2005.
Company-wide net premiums written were $774 million in the Q1 of 2006, a 6.1 percent increase over Q1 2005 net premiums written of $730 million. California net premiums written were $566 million in the quarter, an increase of 7.6 percent over 2005.
Mercury said its “combined ratio (GAAP basis) was 91.8 percent in 2006 Q1, compared with 92.6 percent in Q1 of 2005. Positive development on prior period loss reserves was approximately $10 million and $20 million, respectively, for the periods ended March 31, 2006 and March 31, 2005.
“Net investment income of $39.4 million (after tax $33.1 million) in Q1 2006 increased by 37 percent over the same period in 2005. The after-tax yield on investment income was 4.1 percent on average assets of $3.2 billion (fixed maturities and equities at cost) for Q1. That compares with an after-tax yield on investment income of 3.4 percent on average investments of $2.9 billion (fixed maturities and equities at cost) for the same period in 2005.”
The report also referenced a previously reported income tax charge, “net of federal tax benefit, of approximately $15 million, or $0.27 per share (diluted), relating to Notices of Proposed Assessments upheld by the California State Board of Equalization (“SBE”) for tax years 1993 through 1996 in which the Franchise Tax Board disallowed a portion of its expenses related to management services provided to its insurance company subsidiaries.”
The bulletin noted Mercury “believes the deduction of these expenses is appropriate and intends to challenge the SBE decision in Superior Court.”
The full earnings report is available on the company’s website: http://investor.mercury insurance.com.