Mercury Insurance 2012 Annual Report Download - page 10

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8
MERCURY GENERAL CORPORATION
ifty years later, our premium volume has
grown to $2.6 billion and our product
offerings have expanded to include
homeowners, commercial automobile and
property, and mechanical breakdown insurance.
We employ 4,600 professionals and about 7,700
independent agents who offer Mercury’s products
in thirteen states throughout the nation. Mercury’s
growth from a small California startup insurer fifty
years ago to a multi-billion dollar enterprise would
not have been possible without the talented team
of professionals that helped build this company.
We would like to thank all of our past and present
employees and agents for their contributions to
the success of Mercury.
Our poor financial performance in 2012 is
not how we envisioned celebrating our 50-year
anniversary. Our operating earnings, which
exclude realized gains and losses, were $73.8
million in 2012 compared to $ 153.2 million in 2011,
a decrease of 52%. The decrease in operating
earnings was primarily due to the deterioration in
the combined ratio from 98.5% in 2011 to 102.8%
in 2012. Our 2012 combined ratio was negatively
impacted by a variety of factors, including $39 million
of catastrophe losses, most of which came from
Hurricane Sandy, higher recorded frequency and
severity and $42 million in unfavorable loss reserve
development.
Although our 2012 operating results were
disappointing, they masked several positive
milestones. Total premiums written grew by 3% in
2012 and in the fourth quarter premiums written
grew 5.9% compared to the same period in 2011, the
highest percentage increase since the first quarter of
2006. The growth is attributable to several factors,
including our California revenue neutral rating plan
we implemented in December 2011, which made us
more competitive for new business, as well as an
increase in the number of agents selling our products.
California new business private passenger automobile
applications increased year over year by 19%.
In addition, our results outside of California continue
to improve. Excluding the impact of Hurricane
Sandy, our operations outside of California posted
a combined ratio under 100% in the fourth quarter
and slightly over 100% for the year. Over the past few
years we have taken significant rate action in most
states outside of California and the impact of those
rate actions is having a positive impact on our results.
We believe our underlying results outside of California
For Mercury, 2012 was a milestone year as we celebrated our 50th year in business. Mercury’s
operations began in 1962 in a small office on Wilshire Boulevard in Los Angeles, California.
Our strategy was to provide a competitively priced private passenger automobile product
to California consumers by establishing valuable partnerships with agents, underwriting
our business carefully, effectively managing our claims processes and providing excellent
customer service. We started with six employees in our first year in business and wrote
less than $1 million in premiums.
“ Total premiums written grew by 3% in 2012
and in the fourth quarter, premiums written
grew 5.9% compared to the same period in
2011, the highest percentage increase since
the first quarter of 2006.”