Mercury Insurance 2014 Annual Report Download - page 4

2MERCURY GENERAL CORPORATION
result of rate reductions taken in many states early in 2014
and increased distribution. For 2015, we expect to continue
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our improved competitive position coupled with increased
advertising spend and distribution.
After tax investment income increased 1.8% to $111.5
million. The after-tax yield on investments of 3.5% in 2014
was slightly lower than the after tax yield of 3.6% in 2013.
The current low interest rate environment continues to put
downward pressure on our after tax yield as new money is
being invested at lower yields. Our investment base grew
7.8% to $3.4 billion and offset the slight decline in yield.
Going forward, we expect 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.
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largest states, Florida and Texas, the private passenger auto
combined ratios were 96.6% and 96.1%, respectively. Flat
premium growth was achieved despite a 10% rate reduction
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increases in new business sales of 87% and 92% in Florida
and Texas, respectively. However, we posted unacceptable
results in our next two largest states, New York and New
Jersey. Loss costs for the bodily injury coverages were
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adverse reserve development of $17 million and increased
our 2014 accident year loss estimates. To partially address
the poor results, we increased rates in New York by 3%
effective January 2015 and by 2% in New Jersey effective
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in claims procedures, which include the speeding up of
claims settlement and case reserving, may be affecting our
loss reserve estimates with the possibility that the faster
settling and reserving of claims could lead to favorable
development in the future.
We have taken several steps over the past few years to
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consolidated our claims and underwriting operations located
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Jersey and Texas. Other expense reduction measures were
also taken, including a new commission structure. These
changes have positively impacted our cost structure outside
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structure in the future.
Our combined ratio target for private passenger auto is 95%
and we generally price to that target. However, in states
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that we have not yet achieved, but expect to achieve over
the next several years. This pricing strategy will allow us
to be more competitive than we otherwise would be, but
it means that our margins will be lower than our long term
target for the next few years.
Part of our long-term strategy is to continue to grow our
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was very well received as new business applications
increased over 10% when the new product was launched.
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$369 million in premiums written and posted a combined ratio
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$136.6 million in 2014, a 30.2% increase and the combined
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19.6% increase in premiums written to $58.6 million with
an 81.2% combined ratio. As the personal auto landscape
PREMIUMS WRITTEN
(in millions)
3,500
3,000
2,000
1,500
1,000
0
1495 96 97 98 99 00 01 02 03
2,500
500
04 05 06 07 08 09 10 11 12 13