Mercury General Corp. (NYSE: MCY) on Monday reported a dip in operating income for the third quarter, and announced a dividend increase.
Operating income was $39.7 million, or 72 cents per diluted share, for the third quarter of 2011 compared with operating income of $40.7 million, or 74 cents per diluted share, for the same period in 2010. For the nine months of 2011, operating income was $121.1 million ($2.21 per diluted share) compared with operating income of $123.3 million ($2.25 per diluted share) for the same period in 2010, the company stated.
Separately, the board of directors of the Los Angeles, Calif.-based insurer declared a quarterly dividend of 61 cents per share, a 1.7% increase over 2010’s dividend. The dividend is to be paid on Dec. 29 to shareholders of record on Dec. 15.
Net premiums written were $662.3 million in the third quarter of 2011, a 1.2 percent increase compared with the third quarter 2010 net premiums written of $654.7 million. Third quarter net premiums were roughly $2 billion for the nine months of 2011, a 1 percent increase from the same period in 2010.
The company’s combined ratio (GAAP basis) was 98.3 percent in the third quarter of 2011 and 98.2 percent for the nine months of 2011 compared with 98 percent and 97.8 percent for the same periods in 2010. The company said the loss ratio was affected by unfavorable development of $11 million and favorable development of $18 million on prior accident years’ losses and loss adjustment expenses reserves for the nine months ended Sept. 30 this year and 2010 respectively.
The company attributed the much of the unfavorable development in 2011 to re-estimates of California bodily injury losses, which have experienced both higher average severities and more late reported claims than was originally estimated at Dec. 31, 2010. The company recognized $4 million of pre-tax losses in the third quarter of 2011 as a result of Hurricane Irene.
Mercury also reported a net loss in the third quarter of $3.8 million, or 7 cents per diluted share, compared with net income of $96.8 million, $1.77 per diluted share, for the same period in 2010.
For the nine months of 2011, net income was $111.7 million ($2.04 per diluted share) compared with net income of $175.8 million ($3.21 per diluted share) for the same period in 2010. Included in net (loss) income are net realized investment losses, net of tax, of $43.5 million ($0.79 per diluted share) in the third quarter of 2011 compared with net realized investment gains, net of tax, of $56.2 million ($1.03 per diluted share) for the same period in 2010, and net realized investment losses, net of tax, of $9.4 million ($0.17 per diluted share) for the nine months of 2011 compared with net realized investment gains, net of tax, of $52.5 million ($0.96 per diluted share) for the same period in 2010.
AM Best gives the company an “a-” long-term rating with a stable outlook.
Shares of Mercury were up 28 cents to $44.46 in midday trading on the New York Stock Exchange.
Topics Profit Loss
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