MCY - Earnings call transcript Q2 2018 | Mercury General Corporation

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning. My name is Kelly, and I will be your conference operator today. At this time, I would like to welcome everyone to the Mercury General Second Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. General's call plans, comments and expectations, which affect conference based forward-looking industry This and may current results on events, Mercury Instructions] may and contain statements trends, financial [Operator position. operating future and financial cannot those risks which quantified discussed future and here which cause to operations predicted results or today. Such statements of uncertainties, differ be involve activities and and may materially from over now to the Mr. like would I call to turn Gabriel Tirador. Please, ahead. sir, go

Gabriel Tirador

Mercury's like In President Thank conference Chairman; second me you to I Vice welcome Tirador, quarter CEO. Senior would and I and to is Robert Houlihan, very the President Gabe am Vice Joseph, and Ted Stalick, call. everyone Chief much. and Officer. CFO; with Mr. President George room Product

is Officer. Graves, Chief Chris and President phone Investment Vice On the

the increasing increases take effect $X.XX rate lower XXXX. quarter our and March. unfavorable Insurance we compared second Department personal losses, ratio. catastrophe Mercury of Automobile earned, an rates California, operating second been a quarter. make The comments Company increase due Company and a Company Before and rate and approval increase A XX.X% auto we ratio Insurance. X.X% improve primarily after-tax second in expense was and an per share by quarter went premium rate to second in per will in report increase few of reinstatement share, I'm a to by $X.X development, combined reserve in auto we The with In regarding questions, To pending in are in improvement aided the in X% million compared operating most pleased Insurance combined an earnings California higher California of $X.XX earnings ratio, were the ratio, Insurance impacted XXXX. from personal in Mercury in was was the combined income, increase the quarter XXXX, into in rate. in states. quarter of XX.X% corporate have investment ratio the a quarter tax lower our premiums negatively reinsurance of improvement The to combined to the

$XX In in and Company our million primarily million due Automobile efficiency about Homeowners Insurance in California and by partially increase to offset premiums losses commercial quarter Insurance $X second auto of to personal our The the million direct homeowners' compared business May. quarter lower of adjustment Catastrophe loss related California $X came average auto of on quarter, $X to business ultimate filed was in in line in second in quarter environment. cost increase an XX% in quarter of X.X% increasing a and an of Personal expenses second Advertising expense compared from ratio XXXX. reserve was second million $XX higher defense to of in Mercury Company increasingly light XX% was in ratio accruals, companywide addition, California quarter, development lines in expense XX.X% line and our evaluation our the rate expense were advertising savings. in of the unfavorable litigious premiums the million earned. XXXX. in the possibly compared of costs in of XXXX. commissions the and The represents quarter primarily was an

income the was auto After-tax tax a quarter. ceded XX% assets, certain passenger was XX, income approximately applications Companywide submitted new and XX% yields impact period for rates, interest XXXX. XX% classes investments. the unfavorable the compared after-tax combined of homeowners' obtained earned, for XX, XXXX, losses, six-month June period the reinstatement an and increase Excluding the the XX.X% ending XX% rate, companywide to in in increased to investment ended million. due ratio increased premiums corporate on invested quarter, catastrophe the of and primarily in increased $XX increase short-term to to in six-month company June business private The higher reserve applications development, lower higher investment

Northern fire has Lastly, Carr XX% At week. contained. in since been over burning approximately Wildfire destroyed structures, report, last has is last California the and XXX the

reported total As have and company. one of renter loss XX this two morning, partial XX loss claims claim, claims, evacuation claims, the been to

will our reinsurance provides questions. excess in million million brief of Our background, $XXX treaty With $XX of coverage we catastrophe now that retention. for take

Operator

Your comes Raymond from Peters James. question the from first line of Instructions] [Operator Greg

open. is line Your

Greg Peters

Good morning you. everyone. I quick for questions just had of a couple

-- provide you you timing expectation X.X% insurance is green the when rate pending increases, have the around light the outlined on an around on there might First, commissioner that?

Gabriel Tirador

sometime On I last filed September. or believe September one Auto mid -- the was that so Cal

that more So April, I approved. closer, would is that say, The believe, in one. that's Mercury a recent getting Company one filed so was Insurance one to I just

say, So the few approved Cal least? Auto, at would to months, you Robert, next historically expectation our is within get the

Robert Houlihan

corresponded department. and issues, working Yes, questions no the we've department. still with questions the outstanding certainly. from additional we're in We've There's but coming through are received

be that the very there'll in future. we So progress think near on

Greg Peters

it missing year. it from way accurate is read filing the about takes something? resolution make seems am that initial there's Robert, other it the to true time Is or you the I one on a or that like the time these -- an

Robert Houlihan

as bit there's break accurate, that. or kind a process little shorter intervener to That's than it's it time -- down intervener the shorter although no a an there's been in generally, whether of timeframe And not. we if

Greg Peters

if intervener the is rate correct? excess gets But only the of X.X%, increase involved in

Robert Houlihan

above commissioner's the hearing the hearing. granted a intervener must requests be X.X% grant and on below be discretion that it's X.X% the a at can if increase The less hearing. still the But than below. If filings be it's rule Interveners the whether can they to on any and to around is there interveners that amount as filing. a is

Greg Peters

Okay.

Gabriel Tirador

Insurance we don't don't have we have And one, one the that. the don't well. X.X%, we on one Mercury have Now, on in Auto as one the Cal that one Company

Greg Peters

Okay.

around just is ratio. question second combined the the So

expectation improvement And hold as a underlying I call nice quarter, second to congratulations. of XX.X% should showed reinsurance the reinstatement clarify. your it development, reserve ratio. that to excluded an catastrophes, premium, that should obviously the understand it, the Again XX.X%, in the or better? the I'm with Is and XX.X%, going year You balance combined through it

Gabriel Tirador

I in Mercury increases the mean, into by still I because trends in, not that and think effect it'll are rate loss we with on -- one trends on whether the I have, way, earning March. to effect X.X% went what the the Insurance happens went depend think really, or that

whether the trends benefit stabilize. Ted, forward. not share Fast have want going still quarter that to that the or Track bit down will It'll -- you first stabilized going that? we're came So from a trends, for do The little severity to indicated depend numbers on or the

Ted Stalick

Yes.

in Track down So are for coverages for severities other came -- paid quarter. Fast the down California to BI overall trended in And X.X% quarter. the the

the So moderating be indication an somewhat are that may inflationary that pressures in California.

Greg Peters

the right, or the premium? So even stabilize roll if continue to increases XX.X% better, could hold at if rate they levels through get these or earn

Gabriel Tirador

either I Yes, way. I possible mean guess it's

Greg Peters

not I'm box, Yes, you right. not it about in sorry trying -- put to I that. -- a I'm got okay,

Gabriel Tirador

We we like to or never -- forecast don't earnings. I have… operating ratios No, combined

Greg Peters

the correct? ratio But target you do a for a have combined -- company, have you

Gabriel Tirador

We correct. that's XX%, that's and do,

Greg Peters

Is catastrophes, that including all-in, XX% development? higher including period reserve

Gabriel Tirador

Yes.

Greg Peters

that you be the any to, some were that to assume you're below going ratio in was would XX.X% to be --? losses So if the a actually -- actual catastrophe year. lower, Is on be apples-to-apples, should going because there combined given underlying

Gabriel Tirador

our That's that's a reasonable goal. assumption that

Greg Peters

your is something -- below XX% goal? is Okay. your underlying That

Gabriel Tirador

yes. it, defining you're As

I correct, think it's yes.

Greg Peters

Okay, perfect. And to but… I parse mean words here, don't

Gabriel Tirador

a XX% Yes. No, that's have accurate. combined goal. to is That's ratio Well, our all-in. companywide our goal

Greg Peters

Got the clarity it, thank that. you for on

Gabriel Tirador

Sure.

Greg Peters

And questions, ask I'll -- a then Chris get that a like question to people other I'd guess, I going there's to I chance. know and ask just I whenever so are

it so in like is quarter. the And yield up looks the

And improvement I'm the is real run of and nice the there curious takes through year? moderate or did work might just current of as sustainable, the You rate we job puts balance if a some income. are that investment

Gabriel Tirador

Chris, to that? you want handle

Chris Graves

hear you Can okay? Yes. me

Greg Peters

Yes.

Chris Graves

take cell portfolio. good. okay, in going a Yes, some the calling in on give on phone. there's and Yes, I'm

the current example, bonds that can on roll bonds as cases got at book most municipal the the short got in more on bank with loans, then in and which cash For the pretty still place, portfolio portfolio still accretive be fed. to rising, levels we've rate, But the We've some was rates the through themselves. CLOs, off. balances nice at flipside, rates we've yields on got sensitive short

it's with in So the about portfolio. those XX% fact three of together

The time Fed the makes rates up. sensitive moves So us benefit… each that pretty

Greg Peters

did Chris, you say…

Chris Graves

Yes.

Greg Peters

did of part say you that CLOs Chris, XX%? is

Chris Graves

Yes.

Greg Peters

Okay.

Chris Graves

about right the CLOs of increasing to are, continue an X% that going I exposure that's and now, think, to build. we're portfolio

in wind with -- results benefit also of good And adds my that so company's the and also back. with this everything, quarter's the

I So about I I'm is yet. a numbers the can't certainly rate good yes, say, just in feel turning sustainable that this right now. But

Greg Peters

everyone your Thank for answers. enough. Okay, fair you

Gabriel Tirador

Thank you, Greg.

Operator

next question from your Rob from Bobman line Capital And comes of Returns. the

line is Your open.

Rob Bobman

a thanks lot. ask I and would adverse you I think heard the was commercial a wanted just mentioned, wrong, topics there maybe correct that also on bit? When me Could wondered about. you that a you say it then had repeat I auto. to development, referenced I Hi, saying maybe if was little the if personal out and But started little book, to element I two an Gabe, but expand it heard the bit. you it it expand -- that you you on

Gabriel Tirador

Yes, loss injury. commercial of the and up both of we're Basically it auto a lines claims are with of defense more also bodily going loss adjustment side, on expenses. these personal defending was costs combination business our as

Rob Bobman

$XX half, being on defense personal is and we that element million Should the being the like and the ballpark? in of cost half think auto half commercial

Gabriel Tirador

That's close. pretty

Rob Bobman

growth driving on What's from there, that, going significant was on and home. that? app then Okay. the and separate what's And count pretty both auto apart

Gabriel Tirador

it's of a think I combination factors.

improved. in as there's And rate on close the ratio activity result going I market. think our has been that of increase a

In there's quoting. been addition that, more to

close of I improvement a and ratio believe, combination of, So quoting a rate increases. activity as increased result

don't rate number me, of more started mention increases. of to appeared here, that it rate know magnitude anything rate the and increases and increases, looks month it the want down I it to Although like you to the if slow Robert, recent

Robert Houlihan

advertising is California also We shifted Yes, generated I spend. spend more would more say in California. shift towards business the shopping. rate ad the increase -- our because of more We've in

more auto in marketplace, in of homeowners the more spend a growth California. in shoppers, a I it's combination rate California So and ad driving in increases slightly from bigger and think our

Rob Bobman

Thanks.

Gabriel Tirador

the I being improved And our Dow. close think rates ratio the competitive,

Rob Bobman

of Is to weighted? mean the -- of that in it the I LAE is the sort state a legal or certain -- part representation are and development more geographically back the burden, seeing clear? you not adverse

Gabriel Tirador

seen last I've Southern would whole think I it is mentioned throughout quarter. I I but the California either say Well, worse. state,

Rob Bobman

History Okay. guess. repeats I itself

Gabriel Tirador

Yes.

Rob Bobman

continues. it Hope quarter. good a and gentlemen, Thanks Okay.

Gabriel Tirador

you. Thank

Operator

question Campbell the Christopher next from your line comes KBW. And of from

Your line open. is

Christopher Campbell

Yes. morning. Hi, good

Gabriel Tirador

Good morning.

Christopher Campbell

is last million looking my quarters. I'm reserve guess last If guys you first in I the few about three question have the additions. quarters just $XXX at had the

that So point California put at for to issue behind it do that bigger, kind decide take reserve what once to and this larger might maybe you of a you need you charge BI all? be and

Chris Graves

evaluate going future. to happen quarter. pick that's best essentially based we data we And view available every and in the the our the what's Well, on our reserves estimate of

charge sort we and their it reserve far And of is bath analysis, come is we not of the behind into that own that it that's we have its bake create significant, so a internal typically a are up do. just company creates independently, do what biasing estimate external big actuaries analyses. something or our -- -- not talking us, low. we they have we from you're taking bias And analysis. our differences to and or analysis process. and as point we our higher with as estimate, putting sort big those don't into own the compare we put then a about bias What But And

Robert Houlihan

And I I'd point and California changed, I environment of BI that factors also last especially loss changing reserves the in and that like to become the stable of changing, well. accuracy of from think couple perspective. historical be the there's they've are it, those been to has chosen a stabilizes here more out as development stable, no years the the once that about going were much think more because environment factors question

as exact So, reserving. and you not we It's are I to closer know, that. science think an getting

of So that's estimate use -- best actuaries. the our make basically outside We numbers. we to try

But us estimate. We question we get to of have the there here best and internal actuaries, off that try some that environment change in no to California trends. be is to historical has in the caused

Christopher Campbell

at look mean I if Got factors, development they you it. And materially different versus California loss that are non-California? are you and

Chris Graves

and other think at for through states development at those we reserve. changing you triangle, development think was has some development Gabe what go the look this progress whereas way have pattern. in the describing triangle, of our look progressively California, much across would the half ahead California and as increasing that of you was to the is I than more stable you patterns is are the of more very challenging you we of earlier, that and favorable it get they have states outside as

Christopher Campbell

like get policies, if first-half, you -- might of estimate Got I it. I in factor piping there that be doing changes that to any started that introducing difference, so is kind release reserve, you re-price get incorrect? the That's on you reintroducing not quickly, press -- helpful. mean the any so to able very you reading XX-month was And the in you are or your

Gabriel Tirador

process, level calculation, annual be Certainly effect, that next in that the the for the long and rate how affects higher policy. indication percentage we in certainly consider

So, into consideration. in take respect, we that it

Christopher Campbell

Okay, I strong then, from bankruptcy? great. part the that of but any saw of And the policies, seeing was Axis XX-month like you benefit premium are reintroduction growth, the

Gabriel Tirador

showed Yes, we did. there. non-standard auto our significant And growth company

Christopher Campbell

are like, it doing so so, is Okay. coming And -- you then, in…

Gabriel Tirador

Yes.

Christopher Campbell

are kind rates on much Axis' they So, are -- of are yes, like, the the indication that there bankruptcy, your that what like they -- look are down, what than how how higher versus that then Axis were? and are or prices is up like people

Robert Houlihan

their took, previous samples higher. substantially on at Based we know, you looking policy, that some

Christopher Campbell

Okay. that's helpful. very Got it,

Gabriel Tirador

That would longer that they're in the business. reason no

Christopher Campbell

non-standard Right, yes, other that some from have yes. has up business well. There that been carriers been picking as

Gabriel Tirador

Yes.

Christopher Campbell

just or income versus tax income, more And that was one special? the is there quarter follow-up, adding rate numbers, this little a underwriting kind investment of is that lower, mixing

Robert Houlihan

look under Federal XXXX, you tax lower at benefit we of tax are the if in rate. rate effective Well, our the now

rate income losses are investment around Our tax effective capital XX%, engagement and underwriting XX%. around is income and

how it of the income. of that's the So on out, weight relative sort depends of and math those components works

Christopher Campbell

luck quarter. for thanks Best of Gabe, in Okay. the all answers. the third

Gabriel Tirador

you. Thank

Robert Houlihan

Thanks.

Operator

[Operator Instructions] of Your line Peters next of question comes James. from the Greg Raymond

is open. line Your

Greg Peters

if development commercial Thanks two is unfavorable Thank auto of all, a on you and you ask letting first reserve segment customers, the skewing thoughtful follow-up. from one in in me of any California, for the portion said at are follow-ups; there predisposition Southern of know been auto, has is it the skewing it you. a being side, Actually more to pretty auto, most your or adjustments segment? I risk how segment the I'm for you curious not -- these than another

Gabriel Tirador

for When are of at reserves and a matter. total look reserves, California. consider do one we a Northern our taking pricing our calculate take our book based don't on we California is a but reserve when at business. know standpoint, that not Pricing take that total and for our whole look California in into at we take take We different we from a segment we reserves Southern and a segments. calculating we obviously our territory total, Southern -- and a look account, reserves We

of have And First credibility. of pricing question into take we all, account. is from all, we more standpoint, there no a territory that second

Greg Peters

you, the and Got growing that outside that's California? now mentioned I'm for And is corner I change California, seemingly is development, profile going business and I'm hasn't if that favorable a that it. growth for these your development favorable then outside know you of states been to you I been there of curious wondering development, turned think around

Gabriel Tirador

-- outside business make saw initiatives easier our implementing in have on to got are of that trying we working segmentation for been increase well. next in a they have underwriting we in on software as couple quarter new actually California. auto, about outside private this X.X% grew applications, and We've of the on, our going it agents, new that the improvements weeks, of Actually lot passenger we of X% in slight we a California, we've

we the also things to So but bottom that on improve the our are top only working we hopeful going all that line line. are not are

Greg Peters

to -- that? or other that any would like call you there optimism you like you leave sense -- it states seeing are And are working, with of some just are to are

Gabriel Tirador

I Fed. of that now states just are below would say most well right XXX the

And -- little states, a some grew mean, think of I bit. actually Florida our I bigger Texas

Greg Peters

Okay.

Gabriel Tirador

And that Florida we application was recollection down is which of biggest said, something a overall little But is states. like bit, my standpoint, I the an two count monitor… from

Greg Peters

Yes.

Gabriel Tirador

this up count was quarter slightly. application our -

Greg Peters

in time while, correct? first the that's And a

Gabriel Tirador

yes. if mean application take Yes, I like because down XX%. are a look counts year-to-date, the you at

Greg Peters

market time, I mean of Right. that's period over you, an for shrinking been going extended for so… But back

Gabriel Tirador

yes. Yes,

Greg Peters

like… feel you Do

Gabriel Tirador

We are that continue can we that are hoping hopeful trend. that -- we

Greg Peters

It you the turned company, talked and the for moving may within question corner you of Yes. wondering if have around year? budget with the how I'm the the previous changed sounds Last pieces some overall advertising, full-year, like compares it around there. about has the

Gabriel Tirador

up It's slightly.

our think around year $X to spend tax. $XX we up million, expect budget $X I million or and million is this

Greg Peters

answers. Yes. Great, for thank you again your

Gabriel Tirador

Thank you.

Operator

are no there this at And time. further questions

Gabriel Tirador

you to Thank we this talking you with joining you third look great. quarter, and forward Well, much. in quarter. for Thank very the us

Operator

conclude conference does this today's And call.

disconnect. You now may

Mercury General (MCY) 30 Jul 182018 Q2 Earnings call transcript