SOURCE: Mercer Insurance Group, Inc.

October 28, 2009 16:59 ET

Mercer Insurance Group, Inc. Reports Earnings for the Nine Months and Quarter Ended September 30, 2009

PENNINGTON, NJ--(Marketwire - October 28, 2009) - Mercer Insurance Group, Inc. (NASDAQ: MIGP) reported today its operating results for the nine months and quarter ended September 30, 2009.

3rd Quarter highlights:

--  Net income of $0.56 per diluted share versus $0.28 per diluted share
    in the prior year's quarter,
--  Operating income of $0.51 per diluted share, which was the same as the
    prior year's quarter,
--  A GAAP combined ratio of 98.2% versus 97.9% in the prior year's
    quarter,
--  Book value per share of $25.49.
    

Andrew R. Speaker, President and CEO, commented, "We are happy to have generated an operating profit that is consistent with third quarter earnings in past years. In an environment in which we are challenged by both a slow economy and continued competitive insurance pricing, it is pleasing to see that our disciplined underwriting has lead to profitable operations."

Speaker noted, "We are also delighted that our strategy of maintaining a prudent investment portfolio while also seeking a fair return has continued to protect and enhance our capital position. Our conservatively positioned portfolio, along with our disciplined underwriting performance, has helped increase book value per share to its highest ever level."

"We expect the challenging conditions from the economy and competitive pricing to persist. We will maintain our underwriting and investment discipline, continue to exercise careful expense management and work on building out the new products we've introduced in the past few years. This focus should help us to continue to generate operating profits while protecting our shareholders' capital."

Financial Summary (in thousands, except per share data)

                                 Three Months Ended     Nine Months Ended
                                    September 30,         September 30,
                                    (unaudited)           (unaudited)
                                --------------------  --------------------
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------
Total revenue                   $  39,274  $  39,593  $ 117,996  $ 124,374
Net premiums written               33,355     37,575    105,537    115,863
Net premiums earned                34,681     37,869    105,215    115,590
Net investment income               3,605      3,469     10,833     10,173
Net realized gains (losses) on
 investments                          472     (2,281)       393     (2,944)
Net income, after tax               3,554      1,780     10,195      7,605

Earnings per share - Basic      $    0.57  $    0.29  $    1.64  $    1.22
Earnings per share - Diluted    $    0.56  $    0.28  $    1.61  $    1.19

Combined ratio                       98.2%      97.9%      98.0%      98.0%
Book value per share                                  $   25.49  $   21.39

Reconciliation of non-GAAP
 financial measures:

  Net income                    $   3,554  $   1,780  $  10,195  $   7,605
  Net realized gains (losses) on
   investments,   net of tax         (311)     1,482       (260)     1,913
  Net operating income              3,243      3,262      9,935      9,518

  Operating earnings per share -
   Basic                        $    0.52  $    0.52  $    1.60  $    1.53
  Operating earnings per share -
   Diluted                      $    0.51  $    0.51  $    1.57  $    1.49

In the quarter ended September 30, 2009, the Company reported GAAP net income under U.S. generally accepted accounting principles (GAAP) of $3.6 million, or $0.56 per diluted share. This result compares to net income of $1.8 million, or $0.28 per diluted share, for the same quarter in the previous year. Operating income of $3.24 million approximated the $3.26 million reported in the prior year's quarter.

In the nine months ended September 30, 2009, the Company reported GAAP net income of $10.2 million, or $1.61 per diluted share. This result compares to net income of $7.6 million, or $1.19 per diluted share, for the same period in the previous year. Operating income increased to $9.9 million from $9.5 million in the prior year.

The Company also announced that its Board of Directors has approved a dividend of $0.075 per share, to be paid on December 28, 2009 to shareholders of record on December 11, 2009.

Operating income and operating income per share are non-GAAP financial measures that we present because we believe they enhance an investor's understanding of the Company's core operating performance. Operating income and operating income 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
                                                        September 30,
                                                      2009        2008
                                                  (unaudited)  (unaudited)

Net premiums earned                               $    34,681  $    37,869
Investment income,
 net of investment expenses                             3,605        3,469
Realized investment gains (losses)                        472       (2,281)
Other revenue                                             516          536
  Total revenue                                        39,274       39,593

Losses and loss adjustment expenses                    21,683       22,819
Amortization of deferred policy
 acquisition costs                                      9,499       10,460
Other expenses                                          2,869        3,776
Interest expense                                          358          328
  Total expenses                                       34,409       37,383

Income before income taxes                              4,865        2,210
Income taxes                                            1,311          430

Net income                                        $     3,554  $     1,780

Net income per common share:
  Basic                                           $      0.57  $      0.29
  Diluted                                         $      0.56  $      0.28

Weighted average number of
shares outstanding:
  Basic                                             6,225,483    6,237,804
  Diluted                                           6,389,729    6,382,413

    Supplementary Financial Data

Net written premiums                              $    33,355  $    37,575

Book value per common share                       $     25.49  $     21.39

GAAP combined ratio                                      98.2%        97.9%





                    Consolidated Statements of Income
              (in thousands, except per share and share data)

                                                      Nine Months Ended
                                                        September 30,
                                                      2009         2008
                                                  (unaudited)  (unaudited)

Net premiums earned                               $   105,215  $   115,590
Investment income,
 net of investment expenses                            10,833       10,173
Realized investment gains (losses)                        393       (2,944)
Other revenue                                           1,555        1,555
  Total revenue                                       117,996      124,374

Losses and loss adjustment expenses                    64,643       71,564
Amortization of deferred policy
 acquisition costs                                     29,002       31,163
Other expenses                                          9,438       10,618
Interest expense                                        1,066          961
  Total expenses                                      104,149      114,306

Income before income taxes                             13,847       10,068
Income taxes                                            3,652        2,463

Net income                                        $    10,195  $     7,605

Net income per common share:
  Basic                                           $      1.64  $      1.22
  Diluted                                         $      1.61  $      1.19

Weighted average number of
shares outstanding:
  Basic                                             6,200,840    6,230,476
  Diluted                                           6,321,065    6,382,740

    Supplementary Financial Data

Net written premiums                              $   105,537  $   115,863

GAAP combined ratio                                      98.0%        98.0%



                        Consolidated Balance Sheet
                   (in thousands, except share amounts)

                                               September 30,
                                                   2009        December 31,
                                                (unaudited)       2008
ASSETS
Investments, at fair value:
  Fixed income securities, available-for sale   $    368,429  $    334,087
  Equity securities, at fair value                     8,887        10,203
    Total investments                                377,316       344,290
Cash and cash equivalents                             31,702        37,043
Premiums receivable                                   38,131        34,165
Reinsurance receivable                                80,404        86,443
Prepaid reinsurance premiums                           5,829         7,096
Deferred policy acquisition costs                     19,416        20,193
Accrued investment income                              3,721         3,901
Property and equipment, net                           20,184        16,144
Deferred income taxes                                  4,181         9,814
Goodwill                                               5,416         5,416
Other assets                                           8,544         4,481
Total assets                                    $    594,844  $    568,986

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Losses and loss adjustment expenses           $    308,846  $    304,000
  Unearned premiums                                   79,463        80,408
  Accounts payable and accrued expenses               11,657        13,283
  Other reinsurance balances                          13,495        11,509
  Trust preferred securities                          15,588        15,576
  Advances under line of credit                        3,000         3,000
  Other liabilities                                    3,908         3,940
    Total liabilities                           $    435,957  $    431,716

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 shares, outstanding
   6,865,050 and 6,801,095 shares                          -             -
  Additional paid-in capital                    $     71,979  $     71,369
  Accumulated other comprehensive income              14,374         2,494
  Retained earnings                                   82,939        74,138
  Unearned ESOP shares                                (2,036)       (2,505)
  Treasury Stock, 631,761 and 621,773 shares          (8,369)       (8,226)
    Total stockholders' equity                       158,887       137,270
Total liabilities and stockholders' equity      $    594,844  $    568,986

Contact Information

  • Company Contacts:

    Andrew R. Speaker
    President & CEO
    Mercer Insurance Group, Inc.
    (609) 737-0426

    David B. Merclean
    Senior Vice President & CFO
    Mercer Insurance Group, Inc.
    (609) 737-0426