MCY - Earnings call transcript Q3 2019 | Mercury General Corporation

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Operator

Good morning. My name is Valerie and I will be your conference operator 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. Instructions] [Operator

operating may events forward-looking trends, here materially and and affect and General's operations call current based which of uncertainties comments positions. results may Mercury expectations, financial those cause predicted from today. plans, financial future and which contain cannot conference involve differ or statements and discussed on may Such be This statements and quantified, risks which results to and activities industry future

turn to Sir, like now call over Tirador. would I Gabriel Mr. the please to ahead. go

Gabriel Tirador

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

a regarding questions, we comments the will few make quarter. Before we take

in XXXX to X.X worst third of compared the and deterioration our added commercial per compared combined quarter of operating combined results The Our California operating earnings quarter The of $X.XX auto quarter an deterioration primarily together The the quarter of earnings to XX.X% third the outside companywide third increase from the in points California per was in XX.X% combined was of the to XXXX. business, due ratio quarter in in ratio quarter were passenger share third combined the compared third ratio. was primarily XXXX. to third quarter in to XXXX. business our private the auto the share XXXX in the $X.XX ratio in of in which

development XX% on XXX% year the of auto premium million premium earned a include the favorable outside $X $XX California, results approximately earned reserve in prior compared on in XXXX in million to $XX third third of reserve of compared ratio favorable prior of of $XX For posted private of to year quarter Those of million third quarter of XXXX. the states passenger development we quarter combined million of XXXX.

unfavorable ratio in Those auto Our third development XX% $X of million on on quarter year of prior reserve $XX third posted California approximately earned earned of of the the to compared development quarter a XXX% include of premium the million year third XXXX, of of prior of approximately $X compared premium in XXXX. XXXX. commercial reserve $XX quarter to unfavorable in million results million business combined

auto from XX.X% passenger quarter slightly loss relatively in in the frequency severity of rate the approximately and was third XXXX. of recent third increase XXXX. offsetting third increases. of quarter combined deteriorated the the Our ratio year-over-year to approximately Partially X% Overall, in California quarter compared flat to up the were XXXX private severity XX.X% was in quarter

California, increase In Company these Automobile was a Insurance Insurance Company Automobile increase the of direct XX% and during Approximately, rate quarter was California Company increase Insurance California XXXX. for a Collectively, rate Mercury about XX% the companywide X.X% in increase Mercury of May for earned of implemented two-thirds auto represent Insurance was earned. quarter. rate and Company the X.X% earned premiums March in during was personal rate XXXX the personal auto implemented

second quarter and by was increases. XX.X% in of about quarter quarter recent by auto passenger California was and XX.X% third XXXX ratio increase third deteriorated severity the our of The auto combined second compared in quarter partially reason in the our frequency to XXXX. XXXX. the quarter each frequency rate passenger approximately sequential X% increase in Our California from increased sequential offset XXXX private severity and severity The frequency private primary of the to in the

XX.X%. combined ratio year accident year-to-date Our California is approximately for auto personal

in XX.X% our of approved XXX.X% was ratio X.XX% homeowners’ the XXXX California the compared in by A quarter line combined the homeowners XXXX. August implemented Department rate in of California increase California to third XXXX. was Insurance and in was third quarter Our of

recently our XX% We California increase earned. filed rate of business. represent premiums companywide California another direct homeowners line in of for homeowners X.X% about premiums also

XXXX. Companywide, prior-year $X $X third reserve million we in of compared million development quarter quarter of unfavorable in recorded favorable the to the development reserve of

increase $X the of primarily Insurance, million in grew written. in with acquisition Catastrophe higher and in Department accruals, in was million were accrued to decrease a the the losses, related ratio our California efficiency the to million primarily third slightly $X a in primarily increase from in Hurricane settlement partially XXXX. savings. expense quarter California. quarter, $XX due quarter expense lower the of was XXXX, XX.X% The costs, Redding, third in due third policies quarter and slightly compared written profitability-related The announced the expense to Imelda policy an X.X% to from by compared XX% premiums cost homeowners’ higher in in per Carr the Wildfire Premiums average of in ratio offset previously to Texas, quarter primarily

in this damage wildfires. time, currently California. from early too Several and in wildfires wildfires it’s At to losses estimate these earlier October burning caused our have

limit both excess of occurrence wildfire reinstatement. Our are for period, allows a million Mercury. at $XX $XXX radius has wildfire event reinsurance XX-day provides choice of losses Loss XXX-mile the within includes and and losses the treaty wildfire point the coverage Mercury's catastrophe window catastrophe a for of a radius and million all full within retention for XX-day one total in

to the will or weather. by certainty is loss with higher increased be whether Lastly, we factors underlying to the higher of wind ratio for That to currently it expect the due combined year be and predict severity the there generally combined many said, beyond dry caused than frequency excluding are control. ratio as hard seasonal the our unknown rest quarter fourth higher catastrophes

With brief questions. will we that background, take now

Operator

James. [Operator Instructions] Raymond comes you. question from of Thank Greg Our first Peters

open. is Your line

Greg Peters

questions. taking to couple the for Thanks I a areas. to morning. go want Good of

wildfires, about for about one program talked it talked one Have the on outstanding? reinstatement First is and catastrophe or affected your reinstatement. you yet still -- that you of all, you

Gabriel Tirador

not. have outstanding, Still we

Greg Peters

California, and going the auto a the like yet you're target would combined with two in results the erosion. reasonable longer-term based I severity. have it trends comments the in just round increases; one, two to on near for up then picked auto around in you and about still have the more rate rate that expected going other surprised combined And would seeing ratio curious increases considering and businesses importantly, those least and Okay. I'm started filed another your frequency know frequency Mercury And I and I I'm Insurance, with Cal we've on prove these the to at your of talked targets, what's ratio severity? term. it's doesn't look for Have

couple in questions a maybe So, or you there can of those. answer

Gabriel Tirador

Yes. No. Thanks, Greg.

Our quarterly be results can volatile.

just quarter don't worth of based make decisions on data. we great just one So,

Cal if file have is -- quarter. we're rate our for auto to in a about our you I we this, more some earn year-to-date XX%, in likely think, year end. auto by and Our take say in. private California, some year combined do every that I to passenger it's need We at our rate going look will rate ratio year-to-date accident evaluate

right at what looking we're now. that's So,

Greg Peters

working a California the there. that's ratio stop a know the you it then while you've at when And challenges been you farther being to seems fixed, think getting you are the timeline closer a give the Where might business? fixed? profitability process? I hard elevated piece, it in Okay. outside getting drag now. Are you running like results been And away address for to do an on us it Can of from your on sense combined

Gabriel Tirador

I XX%, California, think XX%. Well, I year think, posted in take if our a calendar look mean, XXXX outside results we you of I at

combined take at outside for ratio. running XX%, of our year XX% close a you as and look If a like California to of today, accident we're XXXX change

of So, address they were This year, decent and Florida of Florida. ‘XX one actually results trying the outside we're and little bit, to pretty has a reasons been deteriorated California.

combined -- some When a about still you lines all we about still ratio We outside that work is at running definitely for take do. want there get look lower. the XX% of combined to So, outside think at I California, of we're earn California. to obviously quarter, of XXX% business ratio our in

various that in to that you we're do plans to Jeff, of with We states? of doing class want have implementing. these respect kind we’re some plans, comment some on anything

Jeff Schroeder

on Yes. the of outside In high-single-digit certainly, commercial of earning these have And rate major outside earning months personal in, number the of coming or in a the states, rate side, the moving got of we in side. in range auto each products the rate California. we've California, on do here, in

Gabriel Tirador

improvements. We're also segmentation making some

because delayed November. we're get to scheduled in some Florida have yet, that's think, Florida in make we approval been I but in, a we were hopeful in change haven't in believe I September, time, but -- that to in received we

Jeff Schroeder

December. November or

Gabriel Tirador

December, okay. or November

Greg Peters

for Thank year-to-date guess, Excellent. X.X% on did The the in third much income basis yield line. you a is up last color. results. quarter the final in pop question, very to the that I It year. investment

the on just perspective year-over-year -- can on a an last And the that. on maybe give downward And yields, is obviously, just so, you my question. I'm causing now, curious movement quarter? for maybe pressure what's updated can basis there you That's us

Jeff Schroeder

last I'm curve market throughout and of Well, three is much some big I a versus since obviously through Money also build. still bonds out Yes, attractive, been rates you about seeing one rates taxables yield very due the actually getting once We’ve started competitive shift cash this towards sure. and a years. duration, much. our tax quarter are of too. flattened, the the this reducing that tax there taxables allowing We yield but not part talked you're on been making year on bigger that's We've mentioned right, it. year, this from to more more exempt, offerings

interest some here optimistic certainly spreads been to somewhat is in room rates. some We're cracks I’m There There's widen. recently. for now. So, seeing weakness

of good actually, we’ll I'm position to positions, rate currently, some trend our bit, if the a take little a in in current up of advantage the and coming repositioning be picks and So, a things get be mistake. long duration that you a situation, of a trap into yield, new little think have lots more would yield. offerings which for There’s but I out process

So, to and just smart. and I'm patient that trying be avoid

Greg Peters

the Excellent. color. Thanks for

Jeff Schroeder

Sure.

Operator

Thank you.

Chris comes from of question Campbell KBW. next Our

is line Your open.

Chris Campbell

morning, Yes. Hi. you everyone. guys well. Good doing are Hope

Gabriel Tirador

Chris. Thanks,

Chris Campbell

core the of guess, on loss kind up ratio I follow question, I'll question. first just

I bps California auto you in of auto. your script XXX and was private when of opened up, said commercial then you deterioration the California think, year-over-year Gabe, outside passenger about

the worse is bps core ratio there XXX -- was So, about loss year-over-year.

So, where bps XXX other from? of deterioration is coming the

Gabriel Tirador

year-over-year? about talking You're

Chris Campbell

correct. Year-over-year, yes. That's

Gabriel Tirador

was of to respect outside -- mean, what remarks, X.X coming auto I deteriorated year-over-year most of as Ted? mentioned earlier from as The year-over-year. last and But, slightly California it was with PPA, I my well, is was quarter, California Yes. mentioned combined it commercial I in points. prepared ratio what

Ted Stalick

what? For

Gabriel Tirador

For to XXXX XXXX. compared

the So, difference XX.X% two XX.X%. versus is between

So, that's about X points.

of points X.X outside then business of So, auto X.X-point which from it, California got coming that of in private is auto. is our passenger California that's the commercial the rest you've and

XX.X% there is X.X and I got was think, that XX.X%, the I X compared there said the point, we've it points, is X.X to points.

Chris Campbell

Okay, got it.

backing then because I Yes, losses Okay. year-over-year. reserve to like out the and the development cat was

all have if that, quarter I XX.X% loss you XX and third in the XXXX I quarter. of do core sorry, XX.X% a I've got -- I'm this So, ratio then for

So, delta is... that

Gabriel Tirador

what quarter. results calendar Okay, comparing It's XXXX, it was the I year-over-year deterioration, that? to outside driving combined good driving quarter difference, which year see. ratio the of really, compared of the year that's was a the third about is. the by calendar were really a talking had -- in of quarter. was change So, a California had was businesses XX% this I and that results outside When was when way, What what business XXX% Right? it I I California,

calendar was So, Chris. recorded calendar was what a points year from we results, I year to actually X.X perspective, comparing

Chris Campbell

what benefits which the And I it. like -- to of wait game in? are game your rate is which lines I of and for soon of we what outside And problems, all or you a just able businesses kind the to plan those rate is then, a like so to be -- should you then, I and got work states, outside file mean, like then, is of rates it guess, the mean, it see California. where seeing of how California? exactly fix And Okay, earn coverages? -- exactly where

Gabriel Tirador

it and were has even I as Florida and a XX%, deteriorated. that we I today, mentioned earlier, at outside of at deterioration take from in combined XXXX, Georgia. think, we XX% a of ratio. Well, look It's a come lot California, as of And

And call. taking I our in rate earning steps. we're I mentioned Jeff that previous think, about in. talked

increases rate that in. have We are earning

-- segmentation. to improve that, our improving to trying addition In are we

it; where to taking very were we it also deteriorated address and our close be XXXX, segmentation. are improve in rate XXXX, we're So, We're to we needed to a to some bit. little we trying

Chris Campbell

I That's of Okay. helpful. Got the in a numbers couple script. think very it. you mentioned severity intro And like and had frequency

to passenger were correct? So, -- were those these auto, just in quarter-over-quarter private confirm California you severity saying and X%, frequency that, auto California up or in of were each numbers,

Gabriel Tirador

No. disclosed frequency Yes, and I of couple severity. a

each. One in of was to the compared we When them up Year-over-year, second flat. look compared I quarter. about at up third of -- recorded Severity relatively year-over-year. you -- a what frequency was That's take X% to the severity ‘XX year-over-year. it about quarter this disclosed X% the the was

Chris Campbell

Okay.

thought it. Yes, it, got So, [indecipherable]. got I

Just trying confirm to that.

Gabriel Tirador

flat severity recorded basically in XX% is BI what and quarter about the in frequency, increase really California and was PPA. for number and year-over-year The recording severity, X% in year-to-date we BI overall severity Yes.

Chris Campbell

have Got auto figures the do book? And it. you for similar like commercial

Gabriel Tirador

that I'm Greg Say sorry. again, -- Chris?

Chris Campbell

you commercial in Do auto a book and severity the for as similar California well. Yes. trends have frequency

Gabriel Tirador

they're in auto. been comparable environment commercial challenging. probably The I here it handy, have has don't tort very but

$X from auto heard higher. more limits and a severity. other as more challenging is in it as well, I appears me the injury for are commercial bar And very to limit the a because it's juries bodily plaintiffs typical up think, driving competitors some you've auto, The commercial is liberal million. aggressive what

that limit. of have offers more when So, you it difficult settlement kind on decisions makes

Chris Campbell

it. got development just years one favorable seeing then, last What one. the emerge from? are accident And Okay, you

Jeff Schroeder

Well, have favorable. think, of reported, we we I yes, didn't -- $X million

So are that. there's a of kind few things both on that going ways

accident I a of bit That picks. and the had pretty by in But, other we seeing that commercial mentioned, far last think of stable some adverse business. lines our we're are auto. as little years offset couple some Gabe of As ultimate as was the favorable

Chris Campbell

answers. Best in thanks the quarter. Okay, fourth Well, the for great. all of luck

Jeff Schroeder

Thank you, Chris.

Gabriel Tirador

you, Thank Chris.

Operator

you. Thank

comes Lynch. next Jay of Merrill Our from question of Cohen America Bank

Your line is open.

Jay Cohen

Yes. Thank you.

accident loss a jumped the reassess maybe where first the out, the the and loss catch-up year third ratio in looks half Chris my was pointed the the third But, half up ratio? as of it any current it quite well, some in bit first year you As model, kind there year, from like it's of seasonality. quarter quarter,

Jeff Schroeder

Jay. anything There that really is not was material,

Jay Cohen

Okay.

that's... So

Jeff Schroeder

quarter frequency the the X% second think, as And than was second quarter. severity was California and X% auto I X% Gabe higher mentioned, or third quarter personal our -- also than percent higher

So, QX you have higher total than at basically X% when you're looking in QX.

Jay Cohen

partly that just bit unusual? little every Does is a And, that happen seasonality? year, was

Gabriel Tirador

Yes.

to little increase quarter best best Second surprising, But a to was us. our to would sequential say our that X% you when a That have I second quarter. and a quarter quarter. I be be tends say, in severity. surprising tends frequency little this was will

Jay Cohen

Okay.

Gabriel Tirador

earlier, quarterly mentioned I be But, they be could can volatile. Jay, results --

Jay Cohen

certainly. too much one read quarter, Never Right. into

Gabriel Tirador

Yes.

Jay Cohen

guys. Okay. Thanks,

Gabriel Tirador

Thanks, Jay.

Operator

of Wrenn Corey from comes question Pecaut. next Our Instructions] [Operator

Your line is open.

Corey Wrenn

a Travelers noticed they Good general about the severity reported, in when about I morning. issues. that just Yes. question severity I trends. talked had

before. wondering had how You guys previous seen just cycles you. severity now. seeing these right like I compare where you we're cycles this would cycle have Thank increases was we've to

Gabriel Tirador

view there cost I it aggressive the most Compared see seen, to as I've And previous it's challenging, probably to up bar, from a a -- as for I a just my it's -- been complaints, tort the personally. trying Perhaps drive earlier, I don't plaintiffs doing but challenging very some aggressive. going I've think, from is cycles, perspective, more mentioned settlements. a I environment, very the this I time. that

think second delayed view BI like environment. as in And severity quarter-over-quarter California, this BI in if severity, with mistaken believe of a Fastrack, that... they're for high not Fastrack, like up kind current I think I I -- I'm the something XX%, environment And So, I was quarter.

Jeff Schroeder

Double-digit.

Gabriel Tirador

was double-digit. It

in for XX%. So, was quarter up second Fastrack quarter-over-quarter the California about

to ahead happens quarter. these and what X%. it. that's Whether third or it's trends just have read X%, lot Now, Year-over-year, the I We're up of can't wait We'll into a trying quarter, we'll stabilize, get one you see. think, it. to see not in

Ted positive California really As believe development of have auto positive mentioned, in I little and development the from had actually, year. prior in bit did development we much passenger quarter. We had not -- really private a we

So, trends very it. green. to take we're severity trying that some pick, of We it's recent it's stay obviously, the ahead most -- because the not most -- very difficult year is to accident right,

where make we that -- ahead something want bodily increased severity So, pick by to costs be high want higher but just it Fastrack, stay California XX% we sure to of picked we than pretty would of. injury indicated in we a

Corey Wrenn

That’s I long seen haven't I either, this, or this -- -- guess. Thanks. that's in you. yes time like Thank a anything

Gabriel Tirador

you. Thank

Operator

Thank you. further I'm showing at this time. no questions

Gabriel Tirador

you joining like Okay. everyone to quarter. this We'll us next talk I'd for thank quarter. to

Operator

this Ladies you concludes and for gentlemen, Thank today's call. conference participating.

You may now disconnect.

Mercury General (MCY) 28 Oct 192019 Q3 Earnings call transcript