Mercury Insurance 2014 Annual Report Download - page 3

1
2014 ANNUAL REPORT
IN 2014, we continued making progress towards
improved operating results with growth in net premiums
written of 4.1% and improvement in our combined ratio
of 0.8 points. Our 2014 operating earnings were $2.28
per share, compared to $2.18 per share in 2013, a 5%
improvement. Excluding the impact of an unexpected
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share, a 28% improvement over 2013. The adjusted
operating earnings of $2.78 per share provided an 8.3%
return on average shareholders’ equity in 2014, which
was better than the 6.5% return in 2013, but still below
our double digit targeted return.
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a private civil litigation in Krumme v. Mercury that was
decided in 2003. In the Krumme decision, the judge
ruled that based on the mountain of evidence reviewed
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of guidance provided as to what constitutes a broker or
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determination and penalty assessment is contrary to
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of fairness. We intend to vigorously litigate this matter
of law and we expect to ultimately prevail on the merits
in a court of law.
The improvement in our 2014 operating results was
primarily due to better margins on policies issued in
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compared to 101% in 2013. Higher average premiums
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as we implemented a 6.9% personal auto rate increase
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companywide premiums. In addition, we implemented
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January 2014, representing about half of our companywide
premiums written.
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personal auto frequency and severity were fairly benign;
up in the low single digits in 2014. However, we did experience
the typical seasonal spike in frequency and severity in
the fourth quarter and we are closely monitoring the
impact that lower gasoline prices and the improvement
in the unemployment rate may have on driving habits. To
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with trend, we requested a 6.9% rate increase which is
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premium growth as rate increases more than offset
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be challenging in 2015 as private passenger auto new
business sales were down 17% in 2014 and the impact
of the lower new business sales in 2014 will negatively
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and excluding our Mechanical Breakdown product, we
posted negative growth of 3.9% in 2014 compared to
negative growth of 7.6% in 2013. However, in the fourth
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Breakdown product. The improvement in growth outside
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LETTER TO SHAREHOLDERS
COMBINED RATIO VS. INDUSTRY
(in percent)
103
100
91
88
85
94
97
1405 06 07 08 09 10 11 12 13
Mercury General U.S. Industry Source for Industry Data: A.M. Best Company