Mercer Insurance Group, Inc. Reports Earnings for the Six Months and Quarter Ended June 30, 2009

PENNINGTON, NJ -- (Marketwire) -- 07/29/09 -- Mercer Insurance Group, Inc. (NASDAQ: MIGP) reported today its operating results for the six months and quarter ended June 30, 2009.

2nd Quarter highlights:

--  Net income of $0.60 per diluted share versus $0.51 per diluted share
    in the prior year's quarter,
--  Operating income of $0.55 per diluted share versus $0.49 per diluted
    share in the prior year's quarter,
--  A GAAP combined ratio of 97.4% versus 98.2% in the prior year's
    quarter,
--  Book value per diluted share of $23.87.
    

Andrew R. Speaker, President and CEO, in commenting on the results, said, "We are extremely pleased with our operating results for the quarter, which were at an all-time high. These results reflect our disciplined underwriting approach and were enhanced by aggressive expense management and reinsurance changes implemented over the past few years."

Speaker noted, "Despite challenges to direct premium writings as a result of the continued slow economic environment, we have had some success with new products we've introduced into our various states. These product introductions have helped offset some of the loss in writings that have occurred as exposures are reduced by the extended recession."

Speaker concluded, "Our capital position grew again during the quarter as our strong investment portfolio performed well. While we recorded a small provision for declines in fair value of securities considered to be other than temporary during the quarter, overall both our fixed income and equity portfolios showed good appreciation in value. Our balance sheet remains strong and we are well positioned from a risk selection standpoint."

Financial Summary (in thousands, except per share data)


                                      Three Months Ended  Six Months Ended
                                           June 30,           June 30,
                                         (unaudited)        (unaudited)
                                      ----------------    ----------------
                                       2009      2008      2009      2008
                                      ------    ------    ------    ------
Total revenue                       $ 39,530  $ 42,708  $ 78,722  $ 84,781
Net premiums written                  40,326    43,749    72,182    78,288
Net premiums earned                   34,952    38,644    70,534    77,721
Net investment income                  3,625     3,343     7,228     6,704
Net realized gains (losses) on
 investments                             402       157       (79)     (663)
Net income                             3,750     3,233     6,641     5,825

Earnings per share - Basic          $   0.61  $   0.52  $   1.07  $   0.94
Earnings per share - Diluted        $   0.60  $   0.51  $   1.06  $   0.91

Combined ratio                          97.4%     98.2%     97.9%     98.2%
Book value per share                                    $  23.87  $  21.78

Reconciliation of non-GAAP financial measures:

Net income                          $  3,750  $  3,233  $  6,641  $  5,825
Net realized gains (losses) on
 investments, net of tax                 266       102       (52)     (431)
Net operating income                   3,484     3,131     6,693     6,256

Operating earnings per share -
 Basic                              $   0.56  $   0.50  $   1.08  $   1.00
Operating earnings per share -
 Diluted                            $   0.55  $   0.49  $   1.07  $   0.98

In the quarter ended June 30, 2009, the Company reported GAAP net income under U.S. generally accepted accounting principles (GAAP) of $3.8 million, or $0.60 per diluted share. This result compares to net income of $3.2 million, or $0.51 per diluted share, for the same quarter in the previous year. Operating earnings increased to $3.5 million from the $3.1 million reported in the prior year's quarter.

In the six months ended June 30, 2009, the Company reported GAAP net income of $6.6 million, or $1.06 per diluted share. This result compares to net income of $5.8 million, or $0.91 per diluted share, for the same period in the previous year. Operating earnings increased to $6.7 million from $6.3 million in the prior year.

The Board of Directors of Mercer Insurance Group, Inc. has approved a dividend of $0.075 per share, to be paid on September 28, 2009 to shareholders of record on September 11, 2009.

Operating income and operating earnings per share are non-GAAP financial measures that we present because we believe they enhance an investor's understanding of Mercer's core operating performance. Operating income and operating earnings per share consist of net earnings adjusted for after-tax net realized investment gains and losses.

Mercer Insurance Group, Inc. offers commercial and personal lines of insurance to businesses and individuals principally in seven states through its insurance subsidiaries: Mercer Insurance Company, Mercer Insurance Company of New Jersey, Inc., Financial Pacific Insurance Company and Franklin Insurance Company.

Certain of the statements in this press release (other than statements of historical facts) are forward-looking statements. Such forward-looking statements include estimates and assumptions related to economic, competitive and legislative developments. These forward-looking statements are subject to change and uncertainty that are, in many instances, beyond the Company's control and have been made based upon management's expectations and beliefs concerning future developments and their potential effect on Mercer Insurance Group, Inc. There can be no assurance that future developments will be in accordance with management's expectations so that the effect of future developments on Mercer Insurance Group, Inc. will be those anticipated by management. Actual financial results including premium growth and underwriting results could differ materially from those anticipated by Mercer Insurance Group, Inc. depending on the outcome of certain factors, which may include changes in property and casualty loss trends and reserves; catastrophe losses; the insurance product pricing environment; changes in applicable law; government regulation and changes therein that may impede the ability to charge adequate rates; changes in accounting principles; performance of the financial markets; fluctuations in interest rates; availability and price of reinsurance; and the status of the labor markets in which the company operates.

                    Consolidated Statements of Income
              (in thousands, except per share and share data)

                                                        Quarter Ended
                                                          June 30,
                                                     2009         2008
                                                  (unaudited)  (unaudited)

Net premiums earned                               $    34,952  $    38,644
Investment income,
 net of investment expenses                             3,625        3,343
Realized investment gains                                 402          157
Other revenue                                             551          564
   Total revenue                                       39,530       42,708

Losses and loss adjustment expenses                    20,761       23,975
Amortization of deferred policy
 acquisition costs                                      9,598       10,341
Other expenses                                          3,678        3,647
Interest expense                                          356          337
   Total expenses                                      34,393       38,300

Income before income taxes                              5,137        4,408
Income taxes                                            1,387        1,175

Net income                                        $     3,750  $     3,233

Net income per common share:
   Basic                                          $      0.61  $      0.52
   Diluted                                        $      0.60  $      0.51

Weighted average number of
 shares outstanding:
   Basic                                            6,196,311    6,233,796
   Diluted                                          6,298,438    6,387,750

     Supplementary Financial Data

Net written premiums                              $    40,326  $    43,749

Book value per common share                       $     23.87  $     21.78

GAAP combined ratio                                      97.4%        98.2%






                    Consolidated Statements of Income
              (in thousands, except per share and share data)

                                                      Six Months Ended
                                                          June 30,
                                                     2009         2008
                                                  (unaudited)  (unaudited)

Net premiums earned                               $    70,534  $    77,721
Investment income,
 net of investment expenses                             7,228        6,704
Realized investment losses                                (79)        (663)
Other revenue                                           1,039        1,019
   Total revenue                                       78,722       84,781

Losses and loss adjustment expenses                    42,960       48,745
Amortization of deferred policy
 acquisition costs                                     19,503       20,703
Other expenses                                          6,569        6,842
Interest expense                                          708          633
   Total expenses                                      69,740       76,923

Income before income taxes                              8,982        7,858
Income taxes                                            2,341        2,033

Net income                                        $     6,641  $     5,825

Net income per common share:
   Basic                                          $      1.07  $      0.94
   Diluted                                        $      1.06  $      0.91

Weighted average number of
 shares outstanding:
   Basic                                            6,188,313    6,226,772
   Diluted                                          6,262,612    6,382,926

     Supplementary Financial Data

Net written premiums                              $    72,182  $    78,288

GAAP combined ratio                                      97.9%        98.2%







                        Consolidated Balance Sheet
                   (in thousands, except share amounts)


                                                   June 30,   December 31,
                                                     2009         2008
                                                  (unaudited)

ASSETS
Investments, at fair value:
   Fixed income securities, available-for sale    $   360,391  $   334,087
   Equity securities, at fair value                     8,988       10,203
     Total investments                                369,379      344,290
Cash and cash equivalents                              23,253       37,043
Premiums receivable                                    39,634       34,165
Reinsurance receivable                                 79,860       86,443
Prepaid reinsurance premiums                            6,188        7,096
Deferred policy acquisition costs                      19,586       20,193
Accrued investment income                               4,315        3,901
Property and equipment, net                            19,543       16,144
Deferred income taxes                                   8,684        9,814
Goodwill                                                5,416        5,416
Other assets                                            4,951        4,481
Total assets                                      $   580,809  $   568,986

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
   Losses and loss adjustment expenses            $   304,041  $   304,000
   Unearned premiums                                   81,149       80,408
   Accounts payable and accrued expenses               10,594       13,283
   Other reinsurance balances                          13,413       11,509
   Trust preferred securities                          15,584       15,576
   Advances under line of credit                        3,000        3,000
   Other liabilities                                    4,598        3,940
     Total liabilities                            $   432,379  $   431,716

Stockholders' Equity:
   Preferred Stock, no par value, authorized                -            -
    5,000,000 shares, no shares issued and
    outstanding
   Common stock, no par value,                              -            -
    authorized 15,000,000 shares, issued
    7,074,333 shares, outstanding
    6,849,268 and 6,801,095 shares
   Additional paid-in capital                     $    71,777  $    71,369
   Accumulated other comprehensive income               7,367        2,494
   Retained earnings                                   79,850       74,138
   Unearned ESOP shares                                (2,195)      (2,505)
   Treasury Stock, 631,761 and 621,773 shares          (8,369)      (8,226)
     Total stockholders' equity                       148,430      137,270
Total liabilities and stockholders' equity        $   580,809  $   568,986