Shares of Mercury General Corp. fell 6 percent on Monday after the property casualty insurer reported a worse-than-expected fourth quarter, largely due to Hurricane Sandy claims on the East Coast and higher than normal seasonal losses in California.
The Los Angeles home and automobile insurance company reported a net loss of $17.4 million (-32 cents a share), compared with net income of $79.5 million ($1.45) in the same period a year earlier. Total revenue fell 9 percent to $681 million. Net premiums rose 6 percent to nearly $655 million. In California, the company saw a 24 percent increase in new automobile policy sales.
The company’s operating loss was 17 cents a share, compared with a year-earlier operating profit of 59 cents. Analysts surveyed by Thomson Reuters on average had expected the company to report an operating profit of 25 cents on revenue of more than $695 million.
Mercury General said it saw $28 million of catastrophe losses related to Hurricane Sandy. Those losses mostly came from the homeowner claims in New York; but auto claims in New Jersey and New York accounted for $6 million of losses. The company said that it historically sees more claims in California in the fourth quarter because of severe weather and increased driving, but did not detail how much worse the 2012 quarter was from the previous year.
The company last month began consolidating its operations outside of California into hubs in Florida, New Jersey, and Texas, a process expected to be finished in the second quarter. Chief Executive Gabe Tirador said Mercury General expects $8 million to $13 million in pre-tax charges in the current quarter related to the restructuring.
“We believe that the hub structure will lead to improved efficiencies and better position the company for future growth,” said Tirador, who expects annual recurring pre-tax savings of about $13 million.
Shares closed down $2.36, or 6 percent, to $37.88 on the New York Stock Exchange.