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Mercury General Sees 1Q Profit, Beats Street

The Associated Press

LOS ANGELES (AP) — Mercury General Corp., which provides automobile, homeowners and commercial property insurance, on Monday reported a first-quarter profit, reversing a year-ago loss, helped by investment gains even as written premiums declined and the company cut 7 percent of its work force.

The results beat Wall Street estimates.

Quarterly profit at the Los Angeles-based company totaled $96.7 million, or $1.75 per share, compared with year-ago loss of $4 million, or 7 cents per share. The latest period includes investment gains of $50.7 million, or 92 cents per share, compared with losses of $59.9 million, or $1.09 per share, in the 2008 period.

Operating profit, a measure most commonly used by insurance analysts, was 83 cents per share in the January to March period, down from $1.02 per share last year.

Analysts surveyed by Thomson Reuters had expected profit excluding one-time items of 64 cents per share, on average.

Mercury General said it cut 360 jobs in the quarter, as well as suspended its employee 401(k) matching program to cut costs. The company took an $8 million charge in the first quarter related to the job cuts.

The annualized cost savings from its cost-cut programs, however, are expected to be more than $20 million, starting from the second quarter of 2009, the company said in statement.

During the most recent quarter, net premiums written slid 8 percent to $670.9 million from $729.3 million, hurt by a 8.5 percent drop in California business and a 6.3 percent decline in other regions.

Mercury General's combined ratio increased 1.5 points to 96.9 from 95.4 during the year-ago period. Combined ratio measures the amount an insurer pays out in claims and other expenses compared with how much it earns from writing insurance policies. A ratio above 100 means the insurer is paying out more in claims and expenses than it takes in from writing policies.

Shares of Mercury General rose 70 cents, or 2.1 percent, to $34.04 in morning trading Monday.