Business & Finance
Business and Finance
Business and Finance
Thu, February 26, 2009
Wed, February 25, 2009 Mercer Insurance Group, Inc.: Mercer Insurance Group, Inc. Announces Fourth Quarter and 2008 Earnings
PENNINGTON, NJ--(Marketwire - February 25, 2009) - Mercer Insurance Group, Inc. (
4th Quarter highlights:
-- Net income of $0.10 per diluted share versus $0.45 per diluted share in the prior year's quarter, -- Operating income of $0.54 per diluted share versus $0.48 per diluted share in the prior year's quarter, -- A GAAP combined ratio of 98.4% versus 98.5% in the prior year's quarter, -- Book value per diluted share of $22.21.
Andrew R. Speaker, President and CEO, commented, "We are pleased with the operating results for the quarter which are the strongest quarterly operating earnings per share ever recorded by the Company. The strong operating performance was partially offset by net realized capital losses, which were comprised mostly of a provision for declines in fair value of securities considered to be other than temporary, and mark-to-market adjustments for interest rate swaps on our trust preferred debt. Because the Company carries investment securities on its balance sheet at fair value, recognition of other than temporary impairments in realized losses does not otherwise change the Company's shareholder's equity or book value per share."
Speaker added, "Economic conditions, particularly the effects of the downturn in residential housing as it applies to our West Coast contractors business, have negatively impacted our direct premiums written. In anticipation of the impact on future net premiums earned, the Company has taken proactive measures to reduce and control expenses, including staff reductions and elimination of other expenses as we focus on maintaining profitable operations and increasing book value."
Speaker concluded, "We continue to maintain a strong balance sheet. Our strategy of prudently investing in securities that provide an adequate return while protecting capital has served us well during the current volatile investment market. Despite the significant decline in equity markets, the overall results for our investment portfolio were strong and helped the Company increase book value in both the quarter and the year, while many of our industry competitors saw declines in those periods."
Financial Summary (in thousands, except per share data) Three Months Ended Twelve Months Ended December 31, December 31, (unaudited) (unaudited) -------------------- -------------------- 2008 2007 2008 2007 (1) --------- --------- --------- --------- Total revenue $ 37,088 $ 43,961 $ 161,462 $ 161,681 Net premiums written 31,488 36,549 147,352 159,666 Net premiums earned 36,987 40,308 152,577 146,675 Net investment income 3,763 3,461 13,936 13,053 Net realized gains (losses) on investments (4,128) (243) (7,072) 24 Net income 629 2,880 8,234 14,235 Earnings per share - Basic $ 0.10 $ 0.46 $ 1.32 $ 2.32 Earnings per share - Diluted $ 0.10 $ 0.45 $ 1.30 $ 2.25 Combined ratio 98.4 98.5% 98.1 95.8% Book value per share $ 22.21 $ 21.48 Reconciliation of non-GAAP financial measures: Net income $ 629 $ 2,880 $ 8,234 $ 14,235 Net realized gains (losses) on investments, net of tax (2,724) (158) (4,667) 16 Net operating income 3,353 3,038 12,901 14,219 Operating earnings per share - Basic $ .54 $ 0.49 $ 2.08 $ 2.31 Operating earnings per share - Diluted $ .54 $ 0.48 $ 2.03 $ 2.25 (1) See discussion below regarding non-recurring retaliatory tax refund recognized in 2007
In comparing the results for the twelve months ended December 31, 2008 to the prior year, the reader should be aware that in the twelve months ended December 31, 2007, the Company recognized non-recurring refunds of state premium retaliatory taxes, plus interest (collectively, the "Retaliatory Tax"), in the after-tax amount of $2.8 million, or $0.44 per diluted share, respectively. Calculated on a pro-forma basis, after removing the effect of the non-recurring retaliatory tax refund described above, the combined ratio for 2007 was 98.3%, operating earnings were $11.4 million and operating earnings per diluted share were $1.81. Nothing of a comparable nature is recognized in the current periods. A discussion of this item can be found in the Liquidity and Capital Resources section of Item 7 of the Form 10-K for the year ended December 21, 2007.
In the quarter ended December 31, 2008, the Company reported GAAP net income under U.S. generally accepted accounting principles (GAAP) of $629,000, or $0.10 per diluted share. This result compares to net income of $2.9 million, or $0.45 per diluted share, for the same quarter in the previous year. The decrease in the current year quarter's net income, as compared to the same quarter in 2007, is attributable primarily to the inclusion of $1.8 million, net of tax, in write-downs of other than temporarily impaired securities, and an after-tax realized loss of $856,000 related to interest rate swaps on our trust preferred debt.
In the twelve months ended December 31, 2008, the Company reported GAAP net income of $8.2 million, or $1.30 per diluted share. This result compares to net income of $14.2 million, or $2.25 per diluted share, for the same period in the previous year, which included the Retaliatory Tax refund described above. Excluding the impact of the Retaliatory Tax refund from the prior year results, net income for 2007 was $11.4 million, or $1.81 per diluted share. The decrease in net income for 2008, as compared to 2007, is attributable primarily to inclusion in the prior year of the retaliatory tax refund, and the impact on 2008 of write-downs of other than temporarily impaired securities in the after-tax amount of $4.1 million, and an after-tax realized loss of $990,000 related to interest rate swaps on our trust preferred debt.
The Board of Directors of Mercer Insurance Group, Inc. has approved a dividend of $0.075 per share, to be paid on March 30, 2009 to shareholders of record on March 13, 2009.
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 so that the effect of future developments on Mercer Insurance Group, Inc. will be those 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 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 December 31, 2008 2007 (unaudited) (unaudited) Net premiums earned $ 36,987 $ 40,308 Investment income, net of investment expenses 3,763 3,461 Realized investment losses (4,128) (243) Other revenue 466 435 Total revenue 37,088 43,961 Losses and loss adjustment expenses 23,655 25,788 Amortization of deferred policy acquisition costs 10,521 10,934 Other expenses 2,233 2,998 Interest expense 357 304 Total expenses 36,766 40,024 Income before income taxes 322 3,937 Income taxes (307) 1,057 Net income $ 629 $ 2,880 Net income per common share: Basic $ 0.10 $ 0.46 Diluted $ 0.10 $ 0.45 Weighted average number of shares outstanding: Basic 6,176,851 6,198,741 Diluted 6,212,856 6,374,106 Supplementary Financial Data Net written premiums $ 31,488 $ 36,549 Book value per common share $ 22.21 $ 21.48 GAAP combined ratio 98.4% 98.5% Consolidated Statements of Income (in thousands, except per share and share data) Year Ended December 31, 2008 2007 (unaudited) Net premiums earned $ 152,577 $ 146,675 Investment income, net of investment expenses 13,936 13,053 Realized investment (losses) gains (7,072) 24 Other revenue 2,021 1,929 Total revenue 161,462 161,681 Losses and loss adjustment expenses 95,219 91,186 Amortization of deferred policy acquisition costs 41,684 38,763 Other expenses 12,851 10,528 Interest expense 1,318 1,215 Total expenses 151,072 141,692 Income before income taxes 10,390 19,989 Income taxes 2,156 5,754 Net income $ 8,234 $ 14,235 Net income per common share: Basic $ 1.32 $ 2.32 Diluted $ 1.30 $ 2.25 Weighted average number of shares outstanding: Basic 6,217,092 6,144,075 Diluted 6,343,522 6,325,348 Supplementary Financial Data Net written premiums $ 147,352 $ 159,666 GAAP combined ratio 98.1% 95.8% Consolidated Balance Sheet (in thousands, except share amounts) December 31, December 31, 2008 2007 (unaudited) ASSETS Investments, at fair value: Fixed income securities, available-for- sale $ 334,087 $ 324,238 Equity securities, at fair value 10,203 17,930 Total investments 344,290 342,168 Cash and cash equivalents 37,043 21,580 Premiums receivable 34,165 36,339 Reinsurance receivable 86,443 83,844 Prepaid reinsurance premiums 7,096 9,486 Deferred policy acquisition costs 20,193 20,528 Accrued investment income 3,901 3,582 Property and equipment, net 16,144 13,056 Deferred income taxes 9,814 7,670 Goodwill 5,416 5,416 Other assets 4,481 2,766 Total assets $ 568,986 $ 546,435 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Losses and loss adjustment expenses $ 304,000 $ 274,399 Unearned premiums 80,408 88,024 Accounts payable and accrued expenses 13,283 14,622 Other reinsurance balances 11,509 14,734 Trust preferred securities 15,576 15,559 Advances under line of credit 3,000 3,000 Other liabilities 3,940 2,691 Total liabilities $ 431,716 $ 413,029 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 7,074,333 and 7,075,333 shares, outstanding 6,801,095 and 6,717,693 shares - - Additional paid-in capital $ 71,369 $ 70,394 Accumulated other comprehensive income 2,494 4,896 Retained earnings 74,138 67,613 Unearned ESOP shares (2,505) (3,131) Treasury Stock, 621,773 and 505,814 shares (8,226) (6,366) Total stockholders' equity 137,270 133,406 Total liabilities and stockholders' equity $ 568,986 $ 546,435
