Mercury General Cuts Staff by 7% While Posting First-Quarter Profit

Tue. May 05, 2009; Posted: 11:47 AM

LOS ANGELES, May 05, 2009 (A. M. Best via COMTEX) -- MCY | Quote | Chart | News | PowerRating -- Mercury General Corp., which said it made a $96.7 million profit during the first quarter, said it was cutting jobs, freezing salaries and ending its employee 401(k) matching program.

By cutting its staff by 7%, or about 360 employees mostly from California, Mercury General (NYSE: MCY | Quote | Chart | News | PowerRating) of Los Angeles said it recorded an $8 million expense during the first quarter 2009 but expected the cost-reduction programs would result in annual cost savings of $20 million. This will begin to be seen in the second quarter this year.

The profit recorded in the first quarter this year is compared with a $4 million net loss during the same time in 2008. Net premiums written were down 8% in the first three months, compared with the same time in 2008, and the corporation's combined ratio increased to 96.9 from 95.4 during the first quarter last year.

However, due to changes in the fair value of its fixed maturity portfolio, Mercury General recorded a $101 million pretax gain during the first quarter. Therefore, Mercury General had a net realized gain on investments, net of tax, of about $50.7 million, compared with a loss of nearly $60 million a year ago during the first quarter.

Mercury Casualty Group currently has a Best's Financial Strength Rating of A+ (Superior).

On the morning of May 5, shares of Mercury General Corp. stock were selling at $34.24, down 1.61% from the previous close.

(By Chad Hemenway, associate editor, BestWeek: Chad.Hemenway@ambest.com)

For full details on Mercury General Corp (MCY) click here. Mercury General Corp (MCY) has Short Term PowerRatings of 5. Details on Mercury General Corp (MCY) Short Term PowerRatings is available at This Link.

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