SOURCE: Mercer Insurance Group, Inc.

February 23, 2011 16:05 ET

Mercer Insurance Group, Inc. Reports Earnings for the Year and Quarter Ended December 31, 2010

PENNINGTON, NJ--(Marketwire - February 23, 2011) - Mercer Insurance Group, Inc. (NASDAQ: MIGP) reported today its operating results for the year and quarter ended December 31, 2010.

On November 30, 2010, Mercer Insurance Group, Inc. ("Mercer Insurance" or the "Company") and United Fire & Casualty Company ("United Fire") of Cedar Rapids, Iowa, issued a joint press release announcing that Mercer Insurance had entered into an agreement and plan of merger with United Fire (the "Merger Agreement") pursuant to which it will acquire all of the outstanding shares of Mercer Insurance for $28.25 per share. The consummation of the merger is subject to United Fire receiving the appropriate regulatory approvals from state insurance regulators, the approval of Mercer Insurance's shareholders, and other terms and conditions set forth in the Merger Agreement. The Merger Agreement was unanimously approved by the Board of Directors of Mercer Insurance. A copy of the agreement was provided as Exhibit 2.1 to the Form 8-K filed by Mercer Insurance with the Securities and Exchange Commission on December 1, 2010. Pursuant to the terms of the Merger Agreement, Mercer Insurance has discontinued its quarterly dividend.

The Company's fourth quarter highlights include:


--  Net income of $0.55 per diluted share versus $0.57 per diluted share in
    the prior year's quarter,
--  Operating income of $0.53 per diluted share versus $0.54 per diluted
    share in the prior year's quarter,
--  A GAAP combined ratio of 94.3% versus 96.5% in the prior year's
    quarter, and
--  Book value per share of $27.88.




Financial Summary (in thousands, except per share data)


                                 Three Months Ended       Year Ended
                                    December 31,          December 31,
                                    (unaudited)           (unaudited)
                                --------------------  --------------------
                                  2010       2009       2010       2009
                                ---------  ---------  ---------  ---------
Total revenue                   $  38,243  $  39,315  $ 153,558  $ 157,312
Net premiums written               31,807     32,293    132,696    137,830
Net premiums earned                34,136     35,198    135,964    140,413
Net investment income               3,445      3,365     13,878     14,198
Net realized gains on
 investments                          210        228      1,786        621
Net income                          3,618      3,626     14,736     13,821

Earnings per share - Basic      $    0.57  $    0.58  $    2.34  $    2.23
Earnings per share - Diluted    $    0.55  $    0.57  $    2.28  $    2.18

Combined ratio                       94.3%      96.5%      96.4%      97.6%
Book value per share                                  $   27.88  $   25.63

Reconciliation of non-GAAP
 financial measures:

Net income                      $   3,618  $   3,626  $  14,736  $  13,821
Net realized gains on
 investments, net of tax              138        150      1,179        410
Net operating income                3,480      3,476     13,557     13,411

Operating earnings per share -
 Basic                          $    0.55  $    0.56  $    2.15  $    2.16
Operating earnings per share -
 Diluted                        $    0.53  $    0.54  $    2.10  $    2.11

In the quarter ended December 31, 2010, the Company reported GAAP net income of $3.6 million, or $0.55 per diluted share, as compared to approximately the same amount, or $0.57 per diluted share, in the same quarter of the prior year. Operating earnings remained approximately the same as the prior year's quarter at $3.5 million, and $0.53 and $0.54 per diluted share for the three months ended December 31, 2010 and 2009, respectively. Included in the expenses of the current year's quarter was an after-tax charge of $204,000 for merger-related expenses, or $0.03 per diluted share.

In the year ended December 31, 2010, the Company reported GAAP net income of $14.7 million, or $2.28 per diluted share. This result compares to net income of $13.8 million, or $2.18 per diluted share, for the same period in the previous year. Operating earnings increased to $13.6 million from $13.4 million in the prior year, or $2.10 and $2.11 per diluted share, respectively. Included in the full year results for 2010 was an after-tax charge of $1.6 million for catastrophes 94 and 96, and an after-tax charge for merger-related expenses of $204,000.

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 Insurance'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. There can be no assurance that future developments will be in accordance with management's expectations. Therefore, the effect of future developments on Mercer Insurance may be different from that anticipated by management. Actual financial results including premium growth and underwriting results could differ materially from those anticipated by Mercer Insurance, 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, including those that may impede its 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,
                                                     2010         2009
                                                 (unaudited)   (unaudited)

Net premiums earned                             $     34,136  $     35,198
Investment income, net of investment expenses          3,445         3,365
Realized investment gains                                210           228
Other revenue                                            452           524
   Total revenue                                      38,243        39,315

Losses and loss adjustment expenses                   20,886        21,499
Amortization of deferred policy acquisition costs      9,307         9,803
Other expenses                                         2,002         2,652
Interest expense                                         358           356
Merger-related expenses                                  314             -
   Total expenses                                     32,867        34,310

Income before income taxes                             5,376         5,005
Income taxes                                           1,758         1,379

Net income                                      $      3,618  $      3,626

Net income per common share:
   Basic                                        $       0.57  $       0.58
   Diluted                                      $       0.55  $       0.57

Weighted average number of shares outstanding:
   Basic                                           6,353,814     6,243,618
   Diluted                                         6,542,171     6,402,686

      Supplementary Financial Data

Net premiums written                            $     31,807  $     32,293

Book value per common share                     $      27.88  $      25.63

GAAP combined ratio                                     94.3%         96.5%




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

                                                        Year Ended
                                                        December 31,
                                                     2010          2009
                                                 (unaudited)


Net premiums earned                             $    135,964  $    140,413
Investment income, net of investment expenses         13,878        14,198
Realized investment gains                              1,786           621
Other revenue                                          1,930         2,080
   Total revenue                                     153,558       157,312

Losses and loss adjustment expenses                   83,737        86,142
Amortization of deferred policy acquisition costs     37,091        38,805
Other expenses                                        10,181        12,090
Interest expense                                       1,419         1,423
Merger-related expense                                   314             -
   Total expenses                                    132,742       138,460

Income before income taxes                            20,816        18,852
Income taxes                                           6,080         5,031

Net income                                      $     14,736  $     13,821

Net income per common share:
   Basic                                        $       2.34  $       2.23
   Diluted                                      $       2.28  $       2.18

Weighted average number of shares outstanding:
   Basic                                           6,305,754     6,211,623
   Diluted                                         6,465,863     6,345,164

      Supplementary Financial Data

Net premiums written                            $    132,696  $    137,830

GAAP combined ratio                                     96.4%         97.6%




                        Consolidated Balance Sheet
                   (in thousands, except share amounts)

                                                December 31,  December 31,
                                                    2010          2009
                                                (unaudited)

ASSETS
Investments, at fair value:
   Fixed income securities, available-for-sale  $    397,130  $    365,464
   Equity securities, at fair value                   10,691         9,484
   Short-term investments, at cost, which
    approximates fair value                            9,849             -
      Total investments                              417,670       374,948
Cash and cash equivalents                             16,345        39,927
Premiums receivable                                   35,172        36,405
Reinsurance receivable                                72,905        79,599
Prepaid reinsurance premiums                           6,331         5,871
Deferred policy acquisition costs                     18,192        18,876
Accrued investment income                              4,261         4,287
Property and equipment, net                           20,316        21,516
Deferred income taxes                                  3,141         4,941
Goodwill                                               5,416         5,416
Other assets                                           3,846         3,568
Total assets                                    $    603,595  $    595,354

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
   Losses and loss adjustment expenses          $    304,641  $    311,348
   Unearned premiums                                  73,793        76,601
   Accounts payable and accrued expenses              11,685        12,150
   Other reinsurance balances                         12,906        12,386
   Trust preferred securities                         15,609        15,592
   Advances under line of credit                       3,000         3,000
   Other liabilities                                   4,412         4,069
      Total liabilities                         $    426,045  $    435,146

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
    7,126,233 and 7,074,333 shares, outstanding
    7,000,009 and 6,883,498 shares
Additional paid-in-capital                      $     73,386  $     72,139
Accumulated other comprehensive income                15,315        12,220
Retained earnings                                     98,481        86,101
Unearned ESOP shares                                  (1,253)       (1,878)
Treasury Stock, 632,391 and 632,076 shares            (8,379)       (8,374)
      Total stockholders' equity                     177,550       160,208
Total liabilities and stockholders' equity      $    603,595  $    595,354

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