Mercury Gen. Net Profits More Than Double
By Michael Ha
NU Online News Service, Nov. 4, 10:45 a.m. EST?Mercury General Corp. reported third-quarter net income of $49.6 million?more that doubling the $18.5 million in net profit posted one year ago?helped by continuing rate hikes and policy count growth.
But in a conference call with analysts, company management said it sees the potential beginning of a soft market in auto insurance.
In the third quarter, Mercury's net premiums written rose to $590.2 million, some 20 percent jump from $491.6 million reported over the year-ago period. Overall combined ratio also improved to 93.4 percent, down from 102.2 percent one year ago.
Mercury General, a major California auto insurer with operations in a number of other states, also commented it is benefiting from continued expansions into new markets. Mercury extended its operations to New Jersey in August and expects to begin operations in Arizona by next year.
The company's nine-month results also improved?the insurer posted net income of $135.1 million for the first three quarters of 2003, sharply higher than $48.8 million reported during the same period for 2002.
But commenting on the auto insurance marketplace, George Joseph, chief executive officer noted that competition among auto insurers is becoming more intense.
"There is no question that competitive environment is more intense than it was one year ago," he said. "Competitors are starting to be more aggressive. Results of many of our competitors are very strong. This is potentially the beginning of a soft market."
Company management also commented on California's devastating wildfires, noting that the disaster's impact on the insurer would be minimal.
Mercury General?which also writes homeowners insurance?estimated its share of the California homeowners' market at about 2 percent. By the end of last month, the insurer said it had received 27 total property burn claims, 10 partial burn claims and 83 smoke damage claims. So far, more than 2,800 homes have been reported destroyed from the sweeping fire storms that devastated parts of the Southern California region.
Based in Los Angeles, Mercury General underwrites all risk classifications of auto insurance, as well as homeowners, mechanical breakdown, commercial and dwelling fire insurance, and commercial property insurance. The company markets its policies through some 2,700 independent agents, a third of which are located in California. Last year, the company posted more than $1.7 billion in sales.
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