California insurer Mercury General Corp. (MCY) reported a swing to fourth-quarter profit on Monday, as lesser claims and lower investment losses offset a decline in premium income.
The Los Angeles, California-based company reported a fourth-quarter net income of $34.2 million or $0.62 per share, compared to a net loss of $168.3 million or $3.07 per share a year ago.
On average, six analysts polled by Thomson Reuters estimated earnings of $0.68 per share for the quarter. Analysts' estimates typically exclude special items.
Fourth-quarter net income included net realized investment losses, net of tax, of $4.0 million or $0.07 per share, compared with net realized investment losses, net of tax, of $141.6 million or $2.59 per share for the same period in 2008. The company had also recognized a net tax benefit of $17.5 million in the third quarter of 2008 as a result of a favorable California Superior Court ruling.
Net premiums written for the fourth quarter were $618.9 million, down 3.5% from $641.6 million in the fourth quarter of 2008. Total revenues for the fourth quarter increased to $677.32 million from $497.90 million in the fourth quarter of 2008.
Analysts expected revenues of $723.96 million for the quarter.
The company experienced premium decreases of 8.0%, 6.8%, and 4.7% in the first, second, and third quarter of 2009, respectively, over comparable quarters in 2008, denoting a slowdown in the rate of premium decline over the course of the year.
Fourth quarter net investment income increased 2.1% to $35.6 million, or $23.1 million after tax, when compared to the same period of 2008. Investment income after-tax yield was 4.1% on average investments of $3.1 billion for the fourth quarter, compared to a yield of 3.7% on average investments of $3.4 billion for the same period in 2008.
Operating income for the fourth quarter was $38.2 million or $0.69 per share, compared to an operating loss of $26.7 million or $0.48 per share for the same period in 2008.
The company had incurred catastrophe losses of $20.0 million in the fourth quarter of 2008, primarily from Southern California wildfires and Hurricane Ike, while no such losses were recorded in the quarter under review.
Combined ratio of the company was 98.1% during the fourth quarter, compared to 101.8% in the fourth quarter of 2008. Loss development on prior periods' loss reserves was $58 million positive for the year ended 2009, compared with $89 million adverse for the same period in 2008. The favorable development in 2009 is largely the result of re-estimates of California bodily injury losses which have experienced both lower average severities and fewer late reported claims than was originally estimated at December 31, 2008.
For fiscal 2009, the company reported a net income of $403.1 million or $7.32 per share, compared to a net loss of $242.1 million or $4.42 per share in the similar period of 2008. Net premiums written for the period declined 5.8% to $2.59 billion from $2.75 billion in the year-earlier period.
The company declared a quarterly dividend of $0.59 per share, representing a 1.7% increase over the quarterly dividend amount paid in 2009. The dividend would be paid on March 31, 2010 to shareholders of record on March 16, 2010.
MCY is losing $0.26 or 0.67% and is currently trading at $38.78, on a volume of 41 thousand shares on the New York Stock Exchange.
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