Mercer Insurance — KBW Insurance Conference 2010
15 slides from Mercer Insurance's conference presentation, Sep 7, 2010
Slide 1: KBW Insurance Conference
KBW Insurance Conference September 7, 2010
Slide 2: Forward-looking statements
Mercer Insurance Group, Inc. (the “Company”) may from time to time make written or oral “forward-looking statements,” including statements contained in the Company’s filings with the Securities and Exchange Commission, in its reports to shareholders and in other communications by the Company, which
Slide 3: Mercer Insurance Group (NASDAQ: MIGP) overview
NASDAQ: MIGP • 2009 NPW of $138 million, primarily from two regions centered on: – New Jersey/Pennsylvania – California (2005 acquisition) • A (Excellent) A.M. Best rating with stable outlook • Marketing primarily commercial lines through 560 independent agents • Underwriting conservatively in chall
Slide 4: Competitive in Agencies
Competitive in Agencies • Real access to senior managers – Only one operating layer between CEO and line underwriters • We listen and respond – Smaller can mean more nimble • In it for the long term – Differentiate on coverages – Modify pricing, not availability • Lucrative – Business is well underw
Slide 5: Track Record of Consistency
Track Record of Consistency • Full-year net and operating income* recorded every year since 2003 IPO – Operating income* of $1.02 per share in 2010 first half compared with $1.07 in 2009 first half • Book value has risen every year since IPO • Full-year GAAP combined ratio below 100% every year sinc
Slide 6: Strategies to Improve Book Value and Maximize Profits
Strategies to Improve Book Value and Maximize Profits • Reduce volatility of operating results by diversifying premium sources – Emphasize commercial writings – Business line diversification – Geographic expansion • Develop and use technology to improve efficiency to lower expense ratio – Improves c
Slide 7: Diversify Premium Sources: Emphasize Commercial Writings
Diversify Premium Sources: Emphasize Commercial Writings • Focus commercial lines products on clearly defined market niches • Offer personal lines strategically on East Coast
Slide 8: Diversify Premium Sources: Business Line Diversification
Diversify Premium Sources: Business Line Diversification • Recent product introductions: – West Coast - Small service contractors – East Coast - Waste haulers, garages • CMP Includes: - Religious institutions - Residential contractors - “Main St.” BOP - Many other classes
Slide 9: Diversify Premium Sources: Geographic Expansion
Diversify Premium Sources: Geographic Expansion Active Mail order surety Inactive • 2005 acquisition brought West Coast operation • Evaluating strategic M&A • Must supplement strategic need • Must be accretive • Agency appointments • Protect franchise value • Focus on underrepresented areas
Slide 10: Loss and LAE Reserves
Loss and LAE Reserves • Bulk of reserves are casualty • Financial Pacific (acquired 2005) – Focused on retail construction – Exposure to construction defect claims – Better regulatory environment • Conservatively reserved • In house legal team handles 90% of CD claims In 000’s
Slide 11: Develop and Use Technology
Develop and Use Technology • Expanding use of internet based processing – Small commercial portals introduced on both coasts – Personal lines portal updated – Increasing familiarity and use by agents – Comparative rating for personal auto to come • In test phase for a service oriented architecture (
Slide 12: Best Uses of Capital
Best Uses of Capital • Reduce reliance on reinsurance – Retention increased from $300,000 at time of IPO to $1 million • Strategic M&A • Support A.M. Best rating • Periodic share repurchases – Over 9% of outstanding shares repurchased since IPO • Shareholder dividend since 2 nd quarter of 2006 – Div
Slide 13: Invest Conservatively
Invest Conservatively • Investment strategy focused on capital protection • High-quality portfolio • Reduced risk by exiting certain securities and classes • Currently tax equivalent yield of 4.92% • Duration at 3.9 years • Small equity portfolio As of 6/30/10, in millions
Slide 14: Improve Book Value and Maximize Profits
Improve Book Value and Maximize Profits • Small, multi-regional property casualty insurer • $112 million market cap, yielding 2.3% • Trading at 64% of book value • Uninterrupted record of profitability and book value growth since 2003 IPO • Viable strategic plan Based on closing price of $17.34/shar
Slide 15: The Mercer Insurance Group
CF THE MERCER INSURANCE GROUP
Mercer Insurance Group — KBW Insurance Conference 2010 on 6ix