Mercury Insurance suffers $23.6 million net loss

Due in part to claims from California rainstorms and Florida sinkholes, Los Angeles-based Mercury Insurance reported a fourth quarter net loss of $23.6 million, compared with net income of $34.2 million for the same period in 2009.

For the year, net income was $152.2 million compared with net income of $403.1 million for the same period in 2009. Included in net loss are net realized investment losses, net of tax, of $15.4 million in the fourth quarter of 2010 compared with net realized investment losses, net of tax, of $4 million  for the same period in 2009, and net realized investment gains, net of tax, of $37.1 million for the year compared with net realized investment gains, net of tax, of $225.2 million for the same period in 2009. Operating loss was $8.3 million  for the fourth quarter of 2010 compared with operating income of $38.2 million for the same period in 2009. For the year, operating income was $115.1 million compared with operating income of $177.9 million for the same period in 2009.

Net premiums written were $617.2 million in the fourth quarter of 2010, a 0.3 percent decrease compared to the fourth quarter 2009 net premiums written of $618.9 million, and were approximately $2.6 billion for the year, a 1.3 percent decrease compared to the same period in 2009.

Results in the fourth quarter 2010 were negatively impacted by catastrophic rainstorms in California and homeowner’s losses in Florida as a result of sinkhole claims, the company said. Mercury estimates that losses resulting from the California rainstorms were approximately $25 million. The Florida homeowners line of business incurred an underwriting loss of approximately $19 million in the fourth quarter, which includes a premium deficiency reserve of $6 million.

Mercury Insurance is exiting Florida’s homeowners market and intends to provide the mandated 180 day non-renewal notice to its approximately 8,000 Florida homeowners policyholders beginning March 2011. The company expects the withdrawal to be complete in the second half of 2012.

Mercury’s combined ratio was 109.9 percent in the fourth quarter of 2010 and 100.7 percent for the year compared with 98.1 percent and 96.9 percent for the same periods in 2009. The company experienced favorable development of approximately $13 million and $58 million on prior accident years’ losses and loss adjustment expenses reserves for the year ended Dec. 31, 2010 and 2009, respectively. The favorable development in 2010 is largely the result of re-estimates of accident year 2009 California bodily injury losses, which have experienced both lower average severities and fewer late reported claims (claim count development) than were originally estimated at Dec. 31, 2009, the company said.

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