Mercury Insurance 2007 Annual Report Download - page 60

58 MERCURYNOW 2007
MANAGEMENT’S DISCUSSION & ANALYSIS
difficult to predict and many of which are beyond the Company’s control. GAAP prescribes when reserves for particular risks including litigation
exposures may be established. Accordingly, results for a given reporting period could be significantly affected if and when a reserve is established
for a major contingency. Reported results may therefore appear to be volatile in certain periods.
From time to time, forward-looking statements are also included in the Company’s quarterly reports on Form 10-Q and current reports on
Form 8-K, in press releases, in presentations, on its web site and in other materials released to the public. The Company undertakes no obligation to
publicly update any forward-looking statements, whether as a result of new information or future events or otherwise. Investors are cautioned not
to place undue reliance on any forward-looking statements, which speak only as of the date of this Annual Report or, in the case of any document
incorporated by reference, any other report filed with the SEC or any other public statement made by us, the date of the document, report or
statement. Investors should also understand that it is not possible to predict or identify all factors and should not consider the risks set forth above
to be a complete statement of all potential risks and uncertainties. If the expectations or assumptions underlying the Company’s forward-looking
statements prove inaccurate or if risks or uncertainties arise, actual results could differ materially from those predicted in any forward-looking
statements. The factors identified above are believed to be some, but not all, of the important factors that could cause actual events and results to
be significantly different from those that may be expressed or implied in any forward-looking statements. Any forward-looking statements should
also be considered in light of the information provided in the Company’s filings with the SEC.
QUARTERLY FINANCIAL INFORMATION
Summarized quarterly financial data for 2007 and 2006 is as follows (in thousands except per share data):
Quarter Ended March 31 June 30 Sept. 30 Dec. 31
2007
Earned premiums $ 755,752 $ 754,076 $ 748,798 $ 735,251
Income before income taxes $ 81,499 $ 95,117 $ 83,675 $ 54,745
Net income $ 60,453 $ 69,509 $ 63,278 $ 44,592
Basic earnings per share $ 1.11 $ 1.27 $ 1.16 $ 0.81
Diluted earnings per share $ 1.10 $ 1.27 $ 1.15 $ 0.81
Dividends declared per share $ 0.52 $ 0.52 $ 0.52 $ 0.52
2006
Earned premiums $ 736,680 $ 753,350 $ 753,122 $ 753,871
Income before income taxes $ 105,214 $ 49,558 $ 91,419 $ 66,218
Net income $ 58,646 $ 37,812 $ 68,227 $ 50,132
Basic earnings per share $ 1.07 $ 0.69 $ 1.25 $ 0.92
Diluted earnings per share $ 1.07 $ 0.69 $ 1.25 $ 0.91
Dividends declared per share $ 0.48 $ 0.48 $ 0.48 $ 0.48
Quarterly results can be affected by many factors including development on loss reserves, catastrophes, realized gains and losses related to
the timing of the sale or write-down of investments and the establishment of liabilities for loss contingencies that meet probability thresholds as
required by GAAP. Net income in the fourth quarter of 2007 includes approximately $23 million ($15 million after tax benefit) in losses resulting
from the October 2007 Southern California fire storms. For the quarter ended June 30, 2006, net income was negatively impacted by adverse loss
reserve development of $35 million recorded for the Company’s Florida and New Jersey automobile lines of business, partially offset by positive
development of $15 million for business written in California.