MCY - Earnings call transcript Q1 2020 | Mercury General Corporation

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Operator

Good afternoon. My name is Jason, and I will be your conference operator today. At this time, I would like to welcome everyone to the Mercury General Quarterly 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 position. 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

I you very Gab like Thank to everyone Mercury's and President quarter much. I'm would call. to welcome conference CEO. first Tirador,

Chief phone, President Chris Graves, Product Stalick, have we Investment Joseph, George Vice Senior President the and and Chairman; Schroeder, Vice Jeff Chief Ted and Officer; On CFO; Officer. and Mr. President Vice

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

COVID-XX The on is world impact is having unprecedented. the

out I'd their our affected and everyone by hearts to and resilience crisis. efforts team prayers X,XXX-plus during this this Our time. thank go members to like for

Our technology over our allowed transition smoothly work in members few past to to home. team us from years the investments

our We are agents serving well. fully and customers functional and

December securities quarter adjustments which The losses portfolio. mark-to-market by the million lost the to XXXX, $X.XX per XXXX. majority losses represents of are or investment Pre-tax company. of continue investments on portfolio share, In company at on the be first includes the value million of $XXX.X investment those a $XXX.X after-tax that our held of X%

in operating of XX.X% of in compared earnings ratio recorded in to in the $X reserve million to XXXX. per the XXXX. of operating quarter, the XXXX. due development in XX.X% combined company million, improvement the in per in $X.XX in the first first a million quarter share was primarily first compared first were first share, the of to of losses quarter $X The to million compared quarter in $X.XX earnings reduction $XX quarter in XXXX. were XXXX first quarter to the $X quarter from The the Catastrophe quarter Our unfavorable

of of impact was combined the quarter quarter XX.X% in first XXXX. unfavorable development, the Excluding reserve compared losses to in the ratio catastrophe XX.X% the and

company auto in compared combined XXXX. $X quarter auto during quarter, development combined business partially due ratio XX.X% first development recorded in quarter in Our a XX.X% in offset reserve auto by unfavorable XXXX. primarily the first of in reserve unfavorable the premiums in passenger increases our private first was taken higher quarter unfavorable of ratio the approximately reduction to of million less from rate private in to of reserve passenger million of average to The severity. $XX in improvement and XXXX, prior frequency, an passenger was compared development the The XXXX, increase of the line

Our quarter of to XXXX compared XXX% homeowners in combined quarter was XXX% ratio first of in XXXX. the the first

catastrophe Homeowners million by of reserve XXXX. to Our were in $X unfavorable the the of less homeowners favorable in compared million quarter XXXX. compared of negatively than development quarter reserve the first were in quarter losses first quarter $X $X to in $X development results million the impacted million of

in reserve the was XXXX. homeowners and ratio losses, impact first XXX.X% combined development of in of catastrophe quarter Excluding the compared the XX.X% the quarter, to

and on California in premiums XX% company-wide of premiums improve California California implemented homeowners XXXX. This direct our a premiums into a line XX. top of our rate August of increase results, To direct increase rate April in represent about homeowners homeowners is of earned. effect earned homeowners homeowners went XX% X.XX% increase on company-wide X.XX% rate earned

$X million of XXXX posted of XXX% quarter in both XXXX. of quarter include and prior-year first unfavorable of development compared XXXX, XXX% business auto approximately the of combined approximately ratio XXXX. reserve the quarter first commercial Our the to a Those in in first results

in quarter was the the ratio combined the both development, first reserve of impact XXXX of Excluding XX% and XXXX.

dates XX.X% made The The first ratio provision. was customers debt in primarily first bad higher COVID-XX. the extended to balance expense bad of XX.X% $X debt provision the as in increase The higher quarter due payment increase expense quarter ratio the to anticipation XXXX, premium due write-off, difficulties of to XXXX. financial number compared facing was is of in a million in of to being the a due company's are in

Premiums the new passenger to coronavirus and in Private the reach homeowners the written applications to average outbreak. as XX%, increase and policy prior grew down an primarily XX% quarter, due in are respectively, compared and homeowners' business auto X.X% written. policies higher premiums over per to

and $XX XX% approximately fewer As auto reduced insurance earned monthly previously a pandemic we result premiums expect personal we auto giving during are the premiums of written second back and Accordingly, by giveback. resulted in be accidents million, less announced, two months, for the customers as to quarter of has to as claims. driving COVID-XX

We the adjustments will and impact to as to further monitor continue COVID-XX related and necessary. economic duration the of make extent

expense premiums We increase compensation back. our without not for reduced expenses. as ratios are declined in expect be proportionate a underwriting future we will quarters, premiums Agent the and to in reduction loss adjustment giving

take will brief now questions. background, that With we

Operator

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

open. is Your line

Greg Peters

what's My difference what the What's and would explain Insurance for difference there between in you ordered? the Commissioner passenger to of first be morning. Good customers? the California If to difference? refunds that two-month is your any question has private is XX%

Gabriel Tirador

ordered giveback. not specific duration starting of specific premium, any but type necessary. type forward he the for was Well, certain felt did a and percentage and further March as any He order giveback. say as order back it April there He did -- California order not Commissioner give did update in going well just companies to any of

want know, don't you else to add that? I do Jeff, anything to

Jeff Schroeder

No, Gabe.

with been it the correctly. time have frame reiterate said just out. the set consistent commissioner we You that point I the would that

Greg Peters

of thought none effect so in two Great. for were -- And months, the -- March your for the effect refunds quarter. I your -- your

next assume the in next I for you're two sort also two? of, then April retroactively and -- month So going or to, refund March

Gabriel Tirador

From Yes. XX, is, approximately in that's think I million remarks. And May the I impact my That's $XX quarter. prepared second it mentioned will March that to XXth, correct.

Greg Peters

go seal on did notify -- you you from doing you Gabe, you you on this? gave And a Did of -- it? did Commissioner guys the sign-off they did did get Did approval they approval -- it?

Gabriel Tirador

didn't of require The order formal order not basically His -- require approval. kind formal approval. did any a gave

Greg Peters

Right.

Gabriel Tirador

required. no just He ask to approval formal companies and there is it, do

Greg Peters

Great.

if underlying expense hadn't in the that up but I go ratio the the the prevailing And said underwriting lower comments accident suppose too, the drives loss with because getting would you're you ratio wouldn't so right? ratio premium. frequency is changed. loss Lower down, a some your there expense -- wins

is that? So on that your net-net view a push how's -- or what's

Gabriel Tirador

We're of with back what at a going long mentioned, result as giving respect to going this to lower we're just and -- to be continues as that evaluate premium frequency Well time. that the and you determinations means how forward going to have make

pre-COVID, potential leads example, some both roads on associated due highways, you It cost speeds supply evidence serious are going going increasing pressures is and damage. -- for and congested up less for severity BI of that's offsetting up, be -- there could which with there was chain it things to material parts before more is on up for accidents. to going as going was and issues. potential There So

a uncertainties is now, there would I lot So, of right say.

On going line, to the our top-line top is go down.

premium We have giveback. the

business lower a as little have bit volume new well. We

to down, are we side, we're but going bad losses loss monitoring this future very On we're How basically the in have also to -- debt it have see provisions. nets out, closely. higher

Greg Peters

us, there filings Can a the for of was Thank answer. that it. think active in it's for update just Have I good pipeline. you the been time Got rate color. being? those couple sidelined Actually, you

Gabriel Tirador

Jeff Yes, I'll let answer that.

Jeff Schroeder

severity in outstanding to to of personal the pandemic here in California had of they were -- the California, emergency. remain And filings declines. we with we on rate Prior act California Yes, that during that But don't applications seeing frequency we state expect department outpaced the Insurance. still hence, our the auto, Greg. the Department increases

So you now. on can say right there are hold that

Greg Peters

talk it. for XXXX thinking going how, to structure year? terms the reinsurance And Can change pivot it's like Got all, reinsurance structure relative to your I'm at we about the you And if Can in the business to homeowners structure? year? last calendar etc. for just things retentions, about the of

Gabriel Tirador

go want Ted, do to ahead and you handle that?

Ted Stalick

Greg. Yes,

the of the wildfire. We're But renewal. So the treaty flavors or currently and getting for audience, just in limit million some $XX a is in wildfire current excess our the in retention, million there $XXX into July X for most small exclude to part, there. process that process remind are of the has our

X. $XX buy our around comparable plan paid a million this we amount a As coverage. We reminder, July current to for

are to how but we buy comparable market the seeing We is, plan amount. a

now, think get really can exactly the shake rates, I our need as maybe before that's our we is know process all As going with reinsurers to far anticipation -- modest we're We in increases. to But into meeting plan. the that's right some where out.

Greg Peters

had $XX guess you retention to you that's could I last virtually year going year going it. or your through it this Do retention, that is that is that stick Got million to change? anticipate the possible happen days. these

Ted Stalick

in treaty. around where it it Right current could change. right our is now, It's desire possible to was keep it the

Gabriel Tirador

mean will it pricing. of -- lot depend, A on depends it I will pricing, on right. that depend Greg,

but So look the that what intention -- right at, where our low the but it's with caveat like keep at is of to it pricing level. now

Greg Peters

a the get I realized that on question we that was last hoping will things. the two mark-to-market I And My focus a of just can investment portion was investment Great. realize gain results. adjustment. just

crisis real they is looking How of that give within how investment secondly, the of us for sale? how valuation were reinvestment then is much much just hit? -- yields today that some before this of And idea First the all, this to the the actual just realized are investment, versus loss?

Gabriel Tirador

Chris?

Chris Graves

Yes. Greg. Hi, Yes.

normalized capital point large different once But into the the as bonds, as lot March, of of that So we far degree. especially stepped of a levels incredible. unfolded, markets mean crisis a these municipal at could to phases really the get, levels on during the in when the you time. government with And quickly quite in pushed started all just the that height go, all bailouts, and the reinvestment were of I market

are traded either tax be We side. there hospitals pressure, very on Those well, -- airport but particularly bonds still competitive still bonds revenues revenues would are support Clearly, or like sectors sales are or that bifurcation trading revenue the of have bonds Illinois certain or certain or that Those pressure. good still holding spread. a other income spread that are cheaply, up. tax really for good fairly at bonds states, bond see under under an state municipal still

So quickly how it's through problems. current has looked this economic surprising market the

the quarter. far we levels take As go, in did losses as mark-to-market the

I just think we amounted of to $XX something million. neighborhood the in

Most we most So of through. saw you losses. mark-to-market that because simply passed it you is of what saw everything

Just XXXX income realized. statement. as with And like in were back in all the that and losses were came shifts gets XXXX, methodology. same pushed labeled Everything market of labeled tremendous through back, unrealized the unrealized as in we realized XXXX then the XXXX, on those we on

Greg Peters

the second your I the in everyone, quarter. snapback mark-to-market given the of for part the for a the -- in Thanks color. see will you, of market, -- guess that reversal Thank we answers. considering adjustment

Gabriel Tirador

Thank you, Greg.

Operator

further time. to back call the I'll no presenters. are at questions turn this the There

Gabriel Tirador

we you much. and to joining quarter, joining quarter. very I'd to you this forward Well, like everyone, look thank, next for Thank us

Operator

today. That Thank call. concludes joining everybody today’s for you conference

disconnect. You now may

Mercury General (MCY) 4 May 202020 Q1 Earnings call transcript