On Dec 5, Mercury General Corporation (MCY) reached a new 52-week high of $56.59 per share, driven by strong third-quarter 2014 results. With about 0.09 million shares exchanging hands in the last trading session, the stock closed at $56.28, gaining 0.46%.
The year-to-date return from the stock came in at 13.2%, which was ahead of the S&P’s return of 12.3%.
With respect to earnings performance, this property and casualty insurer delivered positive surprises in three of the last four quarters with an average beat of 10.3%. In the third quarter of 2014, Mercury General reported adjusted operating income of 81 cents per share, surpassing the Zacks Consensus Estimate by 32.8% and improving 52.8% year over year. The upside came on the back higher average premiums per policy.
Net premiums earned increased 2.2% to $720 million year over year in the reported quarter, reflecting improved premiums for the 15th consecutive quarter.
The net investment income also improved 5.5% to $32.6 million year over year due to higher invested asset balances and favorable reserve development.
In the third quarter, lower-than-expected catastrophe losses resulted in an improvement of 250 basis points in the combined ratio to 96.7%.
Additionally, Mercury General has been focusing on strengthening its balance sheet with cash of $279.7 million (up 4.9% from 2013 level) and total assets worth $4.6 billion (up 7% from 2013-end level).
Mercury General’s consistent efforts to share more profit with shareholders led its board of directors to increase the quarterly dividend to 61.75 cents per share, which will be paid on Dec 26, 2014 to shareholders of record as on Dec 12, 2014.
This Zacks Rank #3 (Hold) stock has been witnessing upward revisions in the Zacks Consensus Estimate over the last 60 days. The Zacks Consensus Estimate for 2014 moved north by 5.4% to $2.94 per share as all the estimates moved up. The company’s long-term growth is targeted at 2.10%.
Other Stocks to Consider
Better–ranked stocks in the same sector worth considering include AmTrust Financial Services, Inc. (AFSI), Arch Capital Group Ltd. (ACGL) and Navigators Group Inc. (NAVG). All these stocks sport a Zacks Rank #1 (Strong Buy).
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