ex99-1.htm

Exhibit 99.1

FOR IMMEDIATE RELEASE

Company Contacts:


Andrew R. Speaker	David B. Merclean
President & CEO	Senior Vice President & CFO
Mercer Insurance Group, Inc.	Mercer Insurance Group, Inc.
(609) 737-0426	(609) 737-0426

Mercer Insurance Group, Inc. reports earnings for the six months

and quarter ended June 30, 2010

Pennington, New Jersey, July 29, 2010 – Mercer Insurance Group, Inc. (Nasdaq: MIGP) reported today its operating results for the six months and quarter ended June 30, 2010.

2nd Quarter highlights:

·	Net income of $0.59 per diluted share versus $0.60 per diluted share in the prior year’s quarter,

·	Operating income of $0.52 per diluted share versus $0.55 per diluted share in the prior year’s quarter,

·	A GAAP combined ratio of 97.0% versus 97.4% in the prior year’s quarter, and

·	Book value per diluted share of $27.26.

Andrew R. Speaker, President and CEO, noted “We are pleased that we have produced consistent overall operating results while facing a difficult market. The prolonged economic recovery, a price sensitive market-place, and diminishing investment yields have placed pressure on our results, and those of the entire property and casualty insurance industry. It is through a disciplined approach to our business that we continue to achieve our steady results.”

Speaker continued, “Book value increased to $27.26 per share. One of our primary goals is the steady growth of book value, as it not only supports our credit ratings but positions us for improvements in the competitive environment.”

“Our direct writings fell by 5.9% for the quarter, and by 2.3% year-to-date. The decrease has resulted from the combination of continuing competition for business in the marketplace, and the weakness in the economy which, particularly in residential construction, has led to reduced exposures to insure. Many competitors are writing insurance at what we believe are undisciplined pricing levels which we are unwilling to match. At the same time, we have successfully introduced a number of new products in our markets. In our West Coast operations, we have introduced with success a product geared at the smaller service contractor. In our East Coast markets we have successfully introduced a waste haulers product and a garage product. Although we are dissatisfied with the overall decline in direct writings, we are pleased these new initiatives are being well received in the marketplace and confident that our disciplined underwriting will lead to satisfactory results.”

Financial Summary (in thousands, except per share data)
	Three Months Ended June 30, (unaudited)							Six Months Ended June 30, (unaudited)
		2010			2009				2010			2009
Total revenue		$	38,016		$	39,530			$	77,185		$	78,722
Net premiums written			37,524			40,326				69,524			72,182
Net premiums earned			33,379			34,952				68,114			70,534
Net investment income			3,499			3,625				7,005			7,228
Net realized gains (losses) on investments			618			402				1,090			(79	)
Net income			3,780			3,750				7,252			6,641

Earnings per share – Basic		$	0.60		$	0.61			$	1.16		$	1.07
Earnings per share - Diluted		$	0.59		$	0.60			$	1.13		$	1.06

Combined ratio			97.0	%		97.4	%			97.6	%		97.9	%
Book value per share									$	27.26		$	23.87

Reconciliation of non-GAAP financial measures:

Net income		$	3,780		$	3,750			$	7,252		$	6,641
Net realized gains (losses) on investments, net of tax			408			266				719			(52	)
Net operating income			3,372			3,484				6,533			6,693

Operating earnings per share – Basic		$	0.54		$	0.56			$	1.04		$	1.08
Operating earnings per share - Diluted		$	0.52		$	0.55			$	1.02		$	1.07

In the quarter ended June 30, 2010, the Company reported GAAP net income under U.S. generally accepted accounting principles (GAAP) of $3.8 million, or $0.59 per diluted share, which approximates earnings of the prior year’s quarter which were $0.60 per diluted share. Operating earnings decreased to $3.4 million from the $3.5 million reported in the prior year’s quarter. The second quarter included after tax development of $0.7 million relating to losses resulting from catastrophes 94 and 96, which occurred in the first quarter of 2010.

In the six months ended June 30, 2010, the Company reported GAAP net income of $7.3 million, or $1.13 per diluted share. This result compares to net income of $6.6 million, or $1.06 per diluted share, for the same period in the previous year. Operating earnings decreased to $6.5 million from $6.7 million in the prior year. Included in the six-month results was an after-tax charge of $1.5 million for catastrophes 94 and 96.

The Mercer Insurance Group, Inc. Board of Directors also announced that it has approved a dividend of $0.10 per share, to be paid on September 27, 2010 to shareholders of record as of September 10, 2010.

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. Therefore the effect of future developments on Mercer Insurance Group, Inc. may be different from that 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, including those 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,
	2010 (unaudited)			2009 (unaudited)

Net premiums earned	$	33,379		$	34,952
Investment income,
net of investment expenses		3,499			3,625
Realized investment gains		618			402
Other revenue		520			551
Total revenue		38,016			39,530

Losses and loss adjustment expenses		20,754			20,761
Amortization of deferred policy
acquisition costs		9,048			9,598
Other expenses		2,584			3,678
Interest expense		353			356
Total expenses		32,739			34,393

Income before income taxes		5,277			5,137
Income taxes		1,497			1,387

Net income	$	3,780		$	3,750

Net income per common share:
Basic	$	0.60		$	0.61
Diluted	$	0.59		$	0.60

Weighted average number of
shares outstanding:
Basic		6,284,892			6,196,311
Diluted		6,436,567			6,298,438

Supplementary Financial Data

Net written premiums	$	37,524		$	40,326

Book value per common share	$	27.26		$	23.87

GAAP combined ratio		97.0	%		97.4	%

Consolidated Statements of Income
(in thousands, except per share and share data)
	Six Months Ended
	June 30,
	2010 (unaudited)			2009 (unaudited)

Net premiums earned	$	68,114		$	70,534
Investment income,
net of investment expenses		7,005			7,228
Realized investment gains (losses)		1,090			(79	)
Other revenue		976			1,039
Total revenue		77,185			78,722

Losses and loss adjustment expenses		42,667			42,960
Amortization of deferred policy
acquisition costs		18,433			19,503
Other expenses		5,348			6,569
Interest expense		704			708
Total expenses		67,152			69,740

Income before income taxes		10,033			8,982
Income taxes		2,781			2,341

Net income	$	7,252		$	6,641

Net income per common share:
Basic	$	1.16		$	1.07
Diluted	$	1.13		$	1.06

Weighted average number of
shares outstanding:
Basic		6,272,131			6,188,313
Diluted		6,424,958			6,262,612

Supplementary Financial Data

Net written premiums	$	69,524		$	72,182

GAAP combined ratio		97.6	%		97.9	%

Consolidated Balance Sheet
(in thousands, except share amounts)

	June 30, 2010 (unaudited)			December 31, 2009
ASSETS
Investments, at fair value:
Fixed income securities, available-for sale	$	389,012		$	365,464
Equity securities, at fair value		8,402			9,484
Short-term investments, at cost, which approximates fair value		12,999			-
Total investments		410,413			374,948
Cash and cash equivalents		16,461			39,927
Premiums receivable		42,472			36,405
Reinsurance receivable		74,780			79,599
Prepaid reinsurance premiums		6,537			5,871
Deferred policy acquisition costs		19,066			18,876
Accrued investment income		4,271			4,287
Property and equipment, net		20,733			21,516
Deferred income taxes		2,844			4,941
Goodwill		5,416			5,416
Other assets		4,448			3,568
Total assets	$	607,441		$	595,354
		,
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Losses and loss adjustment expenses	$	309,167		$	311,348
Unearned premiums		78,676			76,601
Accounts payable and accrued expenses		9,821			12,150
Other reinsurance balances		14,515			12,386
Trust preferred securities		15,601			15,592
Advances under line of credit		3,000			3,000
Other liabilities		5,013			4,069
Total liabilities	$	435,793		$	435,146

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
7,086,833 and 7,074,333 shares, outstanding
6,928,046 and 6,883,498 shares
Additional paid-in capital	$	72,603		$	72,139
Accumulated other comprehensive income		16,735			12,220
Retained earnings		92,257			86,101
Unearned ESOP shares		(1,568	)		(1,878	)
Treasury Stock, 632,391 and 632,076 shares		(8,379	)		(8,374	)
Total stockholders' equity		171,648			160,208
Total liabilities and stockholders' equity	$	607,441		$	595,354