Revenue increased 5.4% over the same quarter a year ago, underperforming the industry average of 8.8%. The current debt-to-equity ratio, 0.30, is low and is below the industry average, implying successful management of debt levels, but the quick ratio of 0.46 is very weak and demonstrates a lack of ability to pay short-term obligations.
Net income decreased by 44.1% to $98.37 million from $176.1 million in the same quarter a year ago, underperforming the S&P 500 and the beverages industry. Shares are down 24.8% over the past year. We believe this reflects several factors, including the market's overall decline (which was actually deeper) and the sharp decline in the company's earnings per share. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
We've downgraded Mercury General (MCY), which engages in writing private passenger and commercial automobile insurance in the U.S., from buy to hold.
The company reported a net loss of $140.54 million, or $2.57 per share, in the third quarter due to net realized investment losses. This compares with a net profit of $63.28 million, or $1.15 per share, during the same quarter a year ago. Excluding net realized investment losses of $180.03 million, or $3.29 per share, operating income was $39.49 million, or 72 cents per share, which missed the most recent consensus estimate of 90 cents per share. Net premiums written declined 8.4% year over year, to $695.14 million from $758.85 million, due to lower premiums written in California and non-California operations. Net premiums earned fell 7% to $696.61 million, hurt by lower net premiums written. Net investment income slipped 2.9% to $38.09 million due to a reduced investment portfolio. The after-tax yield on investment income remained flat at 3.9%. However, net realized investment losses stood at $180.03 million compared to a gain of $1.33 million a year ago. California net premiums written reduced 7.4% year over year to $544.32 million, and California net premiums earned dropped 5.8% to $546.18 million. Non-California net premiums written plunged 11.9% to $150.83 million, and net premiums earned sank 11.0% to $150.42 million.
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