Mercury Insurance 2012 Annual Report Download - page 13

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11
2012 ANNUAL REPORT
Gabriel Tirador
President and Chief Executive Officer
George Joseph
Chairman of the Board
The after-tax yield on investments of 3.8% in 2012
was lower than the 4.2% obtained in 2011. The current
low interest rate environment is putting downward
pressure on our after-tax yield as new money is
being invested at lower yields. Our investment base
remained steady at about $3 billion in invested assets
for both 2012 and 2011. Going forward, there will be
continued downward pressure on our after tax-yield as
bonds with higher coupons mature or are called and
the reinvestment of those proceeds will most likely be
made at lower after-tax yields. To offset some of this
pressure, in 2012 we put more of our cash to work in
dividend paying stocks.
We pride ourselves on having a strong balance sheet.
At year-end, our Shareholders’ Equity was $1.8 billion
and our underwriting leverage remains conservative,
with a premium to surplus ratio of 1.8 to 1. In November
2012, Mercury’s Board of Directors increased the
dividend rate to $0.6125 cents per share, continuing to
provide a generous dividend yield based on the recent
market price of our stock. Our strong capital position
has allowed us to pay a dividend in years, such as 2012,
where the dividend payout ratio is above 100%. We
recognize we cannot, on a long-term basis, have a
payout ratio over 100%, but we also don’t expect to
have profitability at 2012 levels for a long period of
time. Our Board will continue to evaluate our dividend
policy on a quarterly basis and consider factors such
as the Company’s capital position, earnings, tax law
changes and future prospects before a decision is
made on the dividend amount.
We hope you will be able to attend our annual
meeting on May 8, 2013.
Sincerely,
“ We pride ourselves on having a strong
balance sheet. At year-end, our
Shareholders’ Equity was $1.8 billion
and our underwriting leverage remains
conservative, with a premium to surplus
ratio of 1.8 to 1.”
Letter To Shareholders
PREMIUMS WRITTEN
(in millions)
3,500
3,000
2,000
1,500
1,000
0
93 94 95 96 97 98 99 00 01 02
2,500
500
03 04 05 06 07 08 09 10 11 12