Mercury Insurance 2015 Annual Report Download - page 53

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41
Net Income
Year Ended December 31,
2015 2014
(Amounts in thousands, except per share data)
Net income $ 74,479 $ 177,949
Basic average shares outstanding 55,157 55,008
Diluted average shares outstanding 55,209 55,020
Basic Per Share Data:
Net Income $ 1.35 $ 3.23
Net realized investment (losses) gains, net of tax $(0.99) $ 0.95
Diluted Per Share Data:
Net Income $ 1.35 $ 3.23
Net realized investment (losses) gains, net of tax $(0.99) $ 0.95
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Revenues
Net premiums written and net premiums earned in 2014 increased 4.1% and 3.6%, respectively, from 2013. The increase
in net premiums written was primarily due to higher average premiums per policy arising from rate increases in the California
private passenger automobile and homeowners lines of insurance business.
The following is a reconciliation of total net premiums written to net premiums earned:
Year Ended December 31,
2014 2013
(Amounts in thousands)
Net premiums written $ 2,840,922 $ 2,728,999
Change in net unearned premium (44,727)(30,812)
Net premiums earned $ 2,796,195 $ 2,698,187
Expenses
The following table presents the Company’s consolidated loss, expense, and combined ratios determined in accordance
with GAAP:
Year Ended December 31,
2014 2013
Loss ratio 71.0% 72.7%
Expense ratio 27.7% 26.9%
Combined ratio (1) 98.8% 99.6%
(1) Combined ratio for 2014 does not sum due to rounding.
The Company’s loss ratio was affected by favorable development of approximately $3 million and unfavorable development
of approximately $3 million on prior accident years’losses and loss adjustment expense reserves for the years ended December 31,
2014 and 2013, respectively. The favorable development in 2014 was primarily from California personal automobile lines of
insurance business partially offset by adverse development in other states. The unfavorable development in 2013 was primarily
from the Florida private passenger automobile line of insurance business. The 2014 loss ratio was also negatively impacted by a
total of $11 million of catastrophe losses mostly due to winter freeze events in the East Coast and homeowners losses in California
from severe rainstorms. The 2013 loss ratio was also negatively impacted by a total of $17 million of catastrophe losses mostly
due to tornadoes in Oklahoma and severe storms in the Midwest and Southeast regions during 2013. Excluding the effect of
estimated prior periods’loss development and catastrophe losses, the loss ratio was 70.7% and 72.0% for the years ended December
31, 2014 and 2013, respectively. The Company attributes the improved accident year loss ratio to the impact of rate increases
which exceeded underlying loss cost trends in 2014.