MCY - Earnings call transcript Q3 2018 | Mercury General Corporation

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Operator

Good morning. My name is Samaria [ph], and I will be your conference operator for today. At this time, I would like to welcome everyone to the Mercury General Third 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. Sir, ahead. please go

Gabriel Tirador

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

Company California Insurance. expense and California with X.X% have most March. lower pending the the are compared for aided we waiting rate by was share primarily Before Automobile per rate to a we a questions, quarter. increase in Insurance earnings The after-tax quarter To earnings Insurance am the in premium quarter pleased combined comments of make quarter in improvement compared in lower and Mercury California, report quarter states. the in ratio few ratio, combined a share, were operating of to third increases, an the XX.X% I a catastrophe Company combined improvement XXXX, increasing in Insurance operating due we increase in take the rate income, third per third losses, our auto quarter The in auto to XXXX. Company $X.XX XXXX. The regarding the improve will was in of X% an Personal rate Mercury ratio In corporate of Personal tax ratio, Department ratio. an A and combined to lower rate. increase our XX.X% investment to third was $X.XX in approval affect

increase Car May. and our our Homeowners about losses Texas, primarily rate In earned. result XXXX California. in XX% in addition, net and California in Personal quarter, million Redding, was Irma the auto X.X% million premiums losses Georgia. company-wide $XX the of third filed of Catastrophe from to fire in This line Hurricane a Net direct in were in Homeowners premiums Hurricane the of compares the of in Harvey primarily represent Florida catastrophe quarter and California $XX

prior reserve both the business. due slight The third increase earned average a of to and in primarily ratio quarter coupled current commissions premiums. During the of other of the third ratio in XXXX. quarter, unfavorable year our from second of was quarter XX% XX% was from expense the was XXXX. reduction expense The development, expense first in came down third quarter quarter the million we of the line a and and in recorded auto operating large in to million $X development $XX quarter both primarily compared in The Advertising expenses lower XXXX. lower with

assets, XX, reinstatement rate, the tax Companywide million XX.X% to the short-term investment XXXX, in interest invested was rates, a losses, to corporate income the lower and catastrophe income higher nine-month obtained yields was certain At Virginia. be the earned, an classes and period $X our be fourth quarter. combined The increase Georgia in primarily Florida, for to companywide Excluding and in this development impact homeowners' in $XX.X time, quarter, quarter. XX% currently range a increased in nine-month month, due ultimate Michael after-tax in Michael significant of the $X XX, compared the increased and as company ending period ceded of hurricane new the well this XX% X% passenger reserve increase will ending between unfavorable Earlier September ratio caused on will After-tax business million for hurricane the XX.X% we in as information September investment in on losses damage available, auto to private million. based premiums investments. increased applications applications XXXX. submitted approximately higher which from the as believe recorded and losses

provides retention. Our of million our million catastrophe reinsurance of $XXX $XX for excess coverage in treaty

to hard underlying the generally increased many are loss we of we to or ratio fourth will rest year in be be seasonal background, and With is expect brief Lastly, driving beyond catastrophes than the will now in that frequency higher the due unknown the higher quarter our it That to questions. certainty weather. caused by combined excluding predict higher control. combined factors currently there ratio take whether with said, as our severities

Operator

first come Please [Operator James. with with Raymond go question. Instructions] Greg And Peters your question will from your ahead

Greg Peters

third Based here, the it you produced ratio years. guys that something quarter morning. that result what read? see lowest last is right, in like this a the Good on combined looks like, have XX I Is

Gabriel Tirador

that's believe, right, Greg. I Yes,

Greg Peters

Congratulations.

Gabriel Tirador

you. Thank

Greg Peters

it's battle. hard fought been know I a

that rate some favorably, results trending be know are going approved? underlying less there's the two that and line. I is in in – rate the rates you are mentioned your So are to those do you that Homeowners the one are auto in believe pending opening comments reported about I believe, possibility and increases given

Gabriel Tirador

approved. No, we they think still that will be

indications Auto, quarter, were in expecting I we In Cal think the need I we that fact approval. rates. the show the the last we think about talked that

some Cal Auto, rate, we questions answered Additional in or MIC, the really the suggests department. again sometime those but we the and future questions based needed from Not in Cal need believe have necessarily that’s expect the the and in came we've Insurance, the not In I do just on in questions, Auto. do additional whether to near trend. we have that rate And of approval the filed, from based right into same rates -- that’s Department the XXXX this filed we earlier don’t year, really add go the we to on want until Robert our XXXX effect rate when clearly a probably need now. spring to that best that And of mid know, with templates you on filing expect that I that that it Homeowners although we shows we look rate rate. based or the don't anything? trends you rate take guess at is the –

Robert Houlihan

No, much don't to Greg. have commentary, to I really add that

Greg Peters

color. good that’s Well Okay.

development. the about On the causing to worse that trends prior popping calls at year know is unfavorable about this where of trend in around the resolved? we improving the we there's at than Can the talked this I least you that has were the you've months through the but less you months. reserve be issues But year's that And quarter talk with last and year's are think it were the adverse conference development, look nine should up, through volatility obviously been improving, you fourth got to it's some earlier that some nine that? trend development know maybe result

Unidentified Company Speaker

are and development definitely our than the gone last we We’ve was over our us which moderate into California and some the to selections. through the industry quarter the quarters four third bit and period because But baking be expected quarter, at will ultimate more selections, in was that looks the it's of things in several where did underlying a trends moderating to change maybe Well, think gives last six tell, in going I it track end hard look like this it the that adverse two. the or we a data hope quarters development forward. fast

So a sign. good that's also

Gabriel Tirador

link we mentioned but when quarter, less you in continues we're forecasting development, It it as coming appears stabilize, in was our that historical factors whether higher, third quarter future, know me they're don't selecting, think at definitely that's trends on least There's were to we know. better the in or not starting is this we're last to quarter. the the you in which we why we higher. saw But actions that, I forward coming some that

Greg Peters

Well I objective part or XX development. of I be stated about talked several years ratio, to of going that and reserve there's assume combined adverse you've that assume stated you know, as your the negative Gabe, objective not for

going reserves right that adequately to that be assume Is set. are You read? the

Gabriel Tirador

don't over we development any So the know other.

Greg Peters

on, the catching or us the that on flow catching know maybe know a -- you just would from up third I what discretionary operating back little you Or the to results. Can about spend the that bit bit -- the they in expenses expenses and maybe some were refer on talking a can and you're in down talk some be quarter. if bit what there the on the too. held would up ebb of withheld -- So underwriting side your quarter? just about little a you little Were items you're you I we're -- me, reserve reported side, can

Ted Stalick

think were expenses were third last year's operating Our fairly compared I flat they quarter. to

really now at growth that really we helping growing is ratio the a faster rate expenses. in things the than in of operating lot One I is We're earned are think premium. our

ad quarter was third in I the compared year. last think Our to this year the same spend

Gabriel Tirador

and commission down, helped that, is effective that's that's variable. our And rate

the And commission tight standpoint budget. affected That's been rate the expense going So expenses, with from sure, monitoring making we're is down. that we've help. to our our an

those it's of So combination helping that all think expense factors ratio. a are I the

Greg Peters

give the you by expand down, up Usually agents that that can for I’m being can, just comment. rates surprised to on reluctant And second a commission are commission.

Gabriel Tirador

we year-over-year overall, maybe my and three-year two maybe the three-tens about of And number is in a it's are a our and trading Well, down recollection. possibility California that they’re of we’re variable talking or I book commissions point, the think on base and business use. of

those We’ve So, about we’re more not structure in that business expense little or certain all change the ratio bit. have a to paying commission of so here for factors rate down trending driven other I’m California little some bit. talking business commission of type types less, of a combination has the also made lot. a and been a down our where

here its three-tens of or two California. think a point in I

Ted Stalick

July We is for Xst think annual our rate commission adjustment effective agents. all the with our

see half would of the rates So typically that go second commission to the year. and down in the you just expect

Greg Peters

One Chris. question a Right. I question underwriting have more for and then

-- market On the about you? for shrinking to states Or in as position other the again non-California talk about and auto you a comment can is still start is Florida well? stabilized business that it growing

Gabriel Tirador

but outside the It in down passenger quarter. homeowners in were the in auto up California outside in a quarter, still in up the California and for good entire as premiums for in earlier about quarter, was we passenger think very private applications in California of ratio our topline quarter. combined down. an X.X% from the a were in about Florida And account and X% the of was quarter. auto was up Overall X% down California, Posted in the Florida private a standpoint, quarter X.X% third up for up X% on at of about topline. application I about I outside a mentioned

So, top states some growing; are states that are New of are are York, two the the down states count, the Virginia. line and that The Florida down are primary ad on is growing and Texas Oklahoma. the

Greg Peters

prepared more about investment Thanks bit Is could give a you expect you. et Great. to rate chime in that? color. for you talked this income, I whopper for about Chris was details but run for going XX know the be well? little cetera, you new as us good forward a quarter in remarks opportunity of that would And million to a And really a maybe your it

Chris Graves

Hi, Greg.

years be more LIBOR to portfolio to Going back sort of we’ve rates. positioning sensitive several the

been through particularly putting We’re CLOs. seeing positions definitely those our more We’ve capital grades CLO towards of investment. investment benefits

pretty In quite and us more more our buy put opportunities combines And our pretty this a to to we’ve dividend year then say, accretive has right so to yield, to where can have The We has for challenged add a big we time. where And pretty to to then of good credits some which the And see yield. to feeling book that’s we’re rates. now. and just that which actually run where and been general, helps. buy bonds we’re really get And move certainly It’s can’t not that’s speak allowing and not longer see bumps tighter obviously, good are not pickup is so maintain can the all towards that in a some about take We’ve income now more helped, come stretch lot we fixed for seen been no some case back this to through. year. We either. investments have wins seeing good the I equity dividends, anything have rate. risk. hard case.

Gabriel Tirador

has investment other would The grown that thing well. have which also to is, I helped add our us balances

Chris Graves

pickup. Gab. point, can any as good of something you me. see business up income and we we are much it in go you investment years Yes. into annualized That’s income on list really history, our else. That’s put our picked investment well, the Mercury doesn’t numbers when that on a translated approaching have back if And balances over but higher have seen that And balance. investment, does XX strain haven’t

can continue you the think to I rates to you of speculate I – So can normalized that kind investment income better. think do as

Greg Peters

last the ask analysts particularly questions. your third so certainly, those have the no quarter. and been listen that it’s quarters two a ensure doubt. Well, to Well, want quarter noteworthy on Congratulations I was -- other blockbuster

Gabriel Tirador

Thank you, Greg.

Operator

with Please Your with Instructions] Campbell question next is question. go ahead KBW. [Operator from Christopher your

Christopher Campbell

Yes. Hi, good morning, gentlemen.

Chris Graves

Good morning.

Gabriel Tirador

Chris Hi,

Christopher Campbell

on is Hi. the first premium I guess growth. my question

if quarter. Year-over-year decomposing be seeing I But and from you that it picking X% auto growth, like of much XXX noticed this how looks that, versus I rate? XX-month still Because guess you're maybe reintroduction. like the bps if so would back this the So up was out, quarter? growth you're that policy was were the home the from exposure other like

Chris Graves

X% about of o growth the the for on policy the rate. It’s rest

Christopher Campbell

Okay.

then and would excluding other the be exposure rate? X% the introduction X% policy So

Chris Graves

in that Yes, ballpark.

Christopher Campbell

asked just really guess I reserves of helpful. Greg question on That’s I kind few. another And think Okay. a

lower to of So, kind than process like looks the other three at bias heavier and quarter the the the quarter year. in of it lowest third anything be seasonal few Is kind that in the other development last be adverse just quarters seems reserve to looking of would years, year? the of the terms your third the in reserves there the quarter the review of

Chris Graves

We anything follow observation, the every the there’s quarter, an so bias one way same process think interesting that’s I or but in other? don’t

Christopher Campbell

use or just Okay. there’s like have And a depending quarter or same data a that quarter? you input have no different for like you you every

Chris Graves

process. same input, Same

Christopher Campbell

then like in California. environment it. kind high of Got And just level one finally Okay. regulatory the a on

I more gets I kind guess shape create like rate then forward? And of that order as So regulatory were that -- secondary on might a like the rumored think that few ago? November how the of this Mercury risk heightened California’s profitable, just were a environment that election does going one could regulators there months rollbacks kind

Gabriel Tirador

let can to Well, in prescribed on about rates California that have with the respect formula talk and then we I Robert the here chime in election.

Robert Houlihan

Yes.

subject filing, are increases pending has we to have formula time, reduction right would other of formula, there’s filing department request the department The only that the come now, decrease we it’s the a mechanisms extent right filed to On surplus the in can we which of early REIT return if department no to that, rate company – yield on so the two And hasn't for force in discussed period think a but rollback. than and a supported. rates. in

Christopher Campbell

was Commissioner like staff rates. guys. the like his of thought ordering all I review to the Okay, like

I But like by auto homeowners? So risk Or are those if it line? of catching homeowners. be more think profitable, become I becoming up that risk does Now does more a auto would a for on versus like guess? vary is when that

Gabriel Tirador

going have process to the department going reviewed request decrease, we was already right to you can have potential a I filing the be pending but for through filings now. say,

nothing that. above and there’s So beyond

Robert Houlihan

went – you’re down? I out, went to think can only when some referring the is taxes thing maybe were notice kind there of of a is, The what

Christopher Campbell

Yes. That’s it.

Robert Houlihan

tax you’re filing. into we’ve That’s what incorporated referring our I the but think already to, lower rate

have our and going lower formula I tax rates, those Commissioner rate, what for referring that that look to said, we that’s are lower came think the we’re but filings. in tax is hey, the rates you’re out So to at

Christopher Campbell

Okay.

in already X.X baked Correct? have you’re that’s you X.X, So Auto, so and still going And into in rate? the [ph] then Mercury all Cal tax the that’s got lower for asking

Robert Houlihan

Those tax. filings reflect already lower the

Christopher Campbell

it. Got Okay.

Robert Houlihan

have And feeling. adverse than as whoever my just don’t the more gets election, make That’ comment I’ll far any we be as we the that, will elected think today.

Christopher Campbell

Okay. luck for year of best the in of And That’s in very the rest answers. helpful. Thanks XXXX. all

Robert Houlihan

you. Thank

Operator

to it there back to closing panel would And this at questions. remarks at like for now over I that are turn the time time. further no any

Gabriel Tirador

us news quarter much. you you some thank Thank for for to third fourth very bring we joining as like quarter. We’d hope and good in well the you the to

Operator

This call. concludes today’s conference

now disconnect. You may

Mercury General (MCY) 29 Oct 182018 Q3 Earnings call transcript