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Mercury General(MCY) - 2024 Q4 - Earnings Call Transcript
MCYMercury General(MCY)2025-02-12 23:48
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Financial Data and Key Metrics Changes - The fourth quarter after-tax operating income reached 98million,thehighestinthecompany′shistory[9]−Thecombinedratioimprovedto91.498 million, the highest in the company's history [9] - The combined ratio improved to 91.4% for the quarter and 96% for the full year 2024, driven by rate increases and moderating inflation [9] - Catastrophe losses for the quarter were 41 million, contributing 3 points to the combined ratio for the full year [10] - Investment income after tax increased to 61.5millioninQ42024,up1561.5 million in Q4 2024, up 15% year-over-year [11] - Net premiums written grew 16% to 1.3 billion in the quarter and 20.5% to 5.4billionforthefullyear2024[11]BusinessLineDataandKeyMetricsChanges−Thepersonalautoandhomeownersbusiness,whichrepresents885.4 billion for the full year 2024 [11] Business Line Data and Key Metrics Changes - The personal auto and homeowners business, which represents 88% of earned premium, showed favorable results with a core underlying combined ratio of 92.1% for personal auto and 76.1% for homeowners in 2024 [13] - The increase in net premiums was primarily due to higher average premiums per policy resulting from rate increases [11] Market Data and Key Metrics Changes - The company anticipates that investment income for 2025 will be near 2024 levels, indicating stability in investment performance [13] - The company expects gross catastrophe losses from the January wildfires to be in the range of 1.6 billion to 2billion,withasignificantportionoflossesexpectedtoberecoverablethroughsubrogation[14][92]CompanyStrategyandDevelopmentDirection−Thecompanyaimstogrowitsautoandhomeownersbusinessprudentlywhilemonitoringitscapitalpositionandpremiumtosurplusratio[37]−Managementemphasizedtheimportanceofcoreunderlyingearningsinrebuildingcapitallostfromwildfires[12]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedconfidenceinthecoreunderlyingbusiness′sabilitytodelivergoodresultsin2025,despitetheimpactofrecentwildfires[12]−TheCaliforniaDepartmentofInsurance′srecentactionsareseenassupportiveofinsurerstakingappropriaterateactionsfollowingthewildfires[53]OtherImportantInformation−Thecompanyhasover2 billion, with a significant portion of losses expected to be recoverable through subrogation [14][92] Company Strategy and Development Direction - The company aims to grow its auto and homeowners business prudently while monitoring its capital position and premium to surplus ratio [37] - Management emphasized the importance of core underlying earnings in rebuilding capital lost from wildfires [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the core underlying business's ability to deliver good results in 2025, despite the impact of recent wildfires [12] - The California Department of Insurance's recent actions are seen as supportive of insurers taking appropriate rate actions following the wildfires [53] Other Important Information - The company has over 1 billion in cash on hand, earning 4.35% [22] - The company has paid 800milliontoinsuredsprimarilyfordwellinglimitsandhasbilled800 million to insureds primarily for dwelling limits and has billed 1 billion to reinsurers, receiving 531 million to date [22] Q&A Session Summary Question: What might the fair plan total loss look like? - Management stated they do not have an indication of the total fair plan loss at this time [34] Question: How does the company view its premiums to capital ratio? - Management expects the ratio to be in the high twos to low threes and believes core underlying earnings will help drive it down [37] Question: What are the trends in auto frequency and severity? - Frequencies in auto are showing a small decline for property damage and collision, while severity is in low to mid-single digits for property damage and mid-teens for bodily injury [46] Question: Can you provide more details on the claims received? - Approximately 2,700 claims have been reported, with about 650 homeowners policies totaling [65] Question: How is the estimate of 1.6 billion to $2 billion derived? - The estimate is based on total insured values and historical payout percentages from previous wildfire events [73][92] Question: What discussions have been had with reinsurers regarding event classification? - Management indicated there has been no pushback from reinsurers regarding the classification of events [80]