Mercury Insurance 2010 Annual Report Download - page 108

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MERCURY GENERAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
19. Quarterly Financial Information (Unaudited)
Summarized quarterly financial data for 2010 and 2009 are as follows:
Quarter Ended
March 31 June 30 September 30 December 31
(Amounts in thousands, except per share data)
2010
Net premiums earned ................................ $640,614 $642,717 $642,558 $640,796
Change in fair value of investments pursuant to the fair value
option .......................................... $ 18,939 $ (30,537) $ 87,647 $ (29,469)
Income (loss) before income taxes ...................... $ 81,290 $ 15,358 $135,839 $ (50,097)
Net income (loss) ................................... $ 61,179 $ 17,817 $ 96,849 $ (23,647)
Basic earnings per share .............................. $ 1.12 $ 0.33 $ 1.77 $ (0.43)
Diluted earnings per share ............................ $ 1.12 $ 0.32 $ 1.77 $ (0.43)
Dividends declared per share .......................... $ 0.59 $ 0.59 $ 0.59 $ 0.60
2009
Net premiums earned ................................ $666,063 $659,211 $653,758 $646,101
Change in fair value of investments pursuant to the fair value
option .......................................... $ 90,733 $123,617 $191,259 $ (10,127)
Income before income taxes ........................... $140,103 $160,914 $229,226 $ 41,298
Net income ........................................ $ 96,653 $114,447 $157,737 $ 34,235
Basic earnings per share .............................. $ 1.76 $ 2.09 $ 2.88 $ 0.63
Diluted earnings per share ............................ $ 1.75 $ 2.07 $ 2.85 $ 0.62
Dividends declared per share .......................... $ 0.58 $ 0.58 $ 0.58 $ 0.59
Net income was mainly affected by lower net premiums earned and higher total losses incurred, slightly
offset by favorable development on loss reserves, and lower gains due to changes in the fair value of the
Company’s investment portfolio during 2010 compared to 2009. The favorable development of loss reserves is
largely the result of re-estimates of California BI losses. Declines in income during the second quarter of 2010
were driven by declines in the fair value of the Company’s equity securities due to the overall decline in the
equity markets, especially in the oil sector as a result of the oil spill in the Gulf of Mexico. The primary causes of
the net loss during the fourth quarter of 2010 were declines in the fair value of the Company’s municipal
securities due to the overall decline in the municipal markets, catastrophe losses in California from heavy
rainstorms, and increased losses and a premium deficiency reserve recorded in the Florida homeowners line of
business.
Net income during 2009 was mainly affected by the favorable development on loss reserves and gains due
to changes in the fair value of the Company’s investment portfolio. The favorable development of loss reserves is
largely the result of re-estimates of California BI losses. The primary cause of the significant gains in fair value
was the overall improvement in the bond and equity markets, specifically the municipal bond market. Declines in
income during the fourth quarter of 2009 were driven by declines in the fair value of the Company’s municipal
bonds due to deteriorating market conditions.
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