likely return, during the next 4-6 months (WRAP).
This is not hype or P&D. I have analyzed Wrapsters
Inc. in great depth and detail since their IPO in
January. I have been in constant contact with their
management and IR Dept. All of their efforts, are now in the
process of being realized. Follow these five URL's, and
make your own decision. Your time and DD (due
diligence) will be well rewarded.
Note: I have heard from both the CEO and
V.P. of Operations. They will be releasing news on
several acquisitions and strategic alliances, of which,
they are in current progress. The first, 'a major
competitor' acquisition, of 5-6 million dollars (which has
already been financed) will be finalized in the first two
weeks of July. (Wrapsters Inc. has been in a quiet
period for the past 2 months on this deal) This will be
the building block for 10-12 other deals, which are
to proceed behind it.
The stock trades, on
next to no volume and has little public exposure. The
current float is amazingly low, at 600,000 shares. IMO
the stock will sky-rocket on any and all news to
come. They are in the process of having over 100
company/franchisee restaurants, open within the next nine months.
Two of the individuals, running and financing
this company (Thomas E. Metzger and Clyde E. Culp
III), have some of the best background and credentials
I have seen, for this industry.
are also, in the process of opening a major
E-Commerce site: Healthnet.com. Offering everything from
vitamins to supplements, including a massive information
data base on all health issues: Health News, Health
Nutrition, Family Health, Health Resources, Health &
Wellness. (As of conversation on 6/25/99, with the Investor
relations Department, this is going to be very monumental
and has had 6 months of R&D into it). The launch date
is projected in the month of July.
For further information you can contact:
Investor Relations: Pete Scott or Ed Koziol
Wrapsters, Inc., Atlanta
President / CEO
Phone: (770) 346-9897
Steven J. Devine
346-9897 (ext. 3)
P.S. If your undecided, just keep (WRAP)
under favorites and look for the first major company
news, to start coming out in July.
My intuition, but no empirical data, suggests
that you make a good point here. Selling on price
would seem to result in lower retention over the long
haul. Some of the folks who have posted on the
Progressive message board recently may actually have some
data. I'll ask there.
You make a weaker point
when you argue the deterioration in GEICO's
underwriting profit, because I think the underlying economic
reality is that all major auto writers' economic results
are deteriorating, but still remain profitable. GEICO
is simply reporting more deterioration than
Allstate. This does not necessarily mean that competition
is hurting GEICO more than Allstate. Indeed we
probably need to wait a few quarters (or years) to "get
all the results."
Regarding agents, I don't
see that much value added in my dealings, but that
may be because I work in the industry so I don't need
Geico on Friday reported a pre-tax underwriting
profit of $20 million for the first six months of 1999
versus $154 million in
Allstate has one of the lower underwriting
expense ratios in the industry. I will give you Geico
does shave some points by selling direct and not
paying agent commissions. However, as much as people on
the board want to complain about agents, they do add
value to the customer and that is what is being
I don't really have any hard numbers on Geico's
retention, however, playing in the game where you sell
direct and sell price you will attract the shoppers and
they will tend to turn over more often. The loyalty
does not exist in this segment. Higher turnover will
result in more expense.
It may be awhile until we
get all the results, but Geico has shown
deterioration in its combined ratio in the most recent few
quarters......more to come, stay tuned as pricing tightens up.
So how do we know that Warren won't go for
cross-selling once he's picked up most of the younger
generation, as they age and want insurance for homes and
such? Yes, I know GEICO is a one-trick pony, but
there's no saying he can't buy a full range P&C insurer.
Hmm, the way ALL stock is going, the rumors about him
buying ALL might actually come true ;') Look for a
Bloody Monday in the management suites if he does. Or at
least the liberal use of golden parachutes.
another subject entirely. This is now the time to invest
in the Asian market, which everyone thinks is dead.
The Asian Tigers are roaring back. This is from our
friend Loy Weston, an old Asia hand who founded KFC
Japan and Pacific Roasters LTD from scratch, along with
a string of successful businesses, besides writing
for WSJ and The Economist, and who knows a Lot more
about Asia than those dopey "consultants" everyone
hires to blow them full of smoke. Loy says the time is
now. He will soon be coming out with a book on the
subject. It is going to print as we speak and will be well
worth perusing. We will notify everyone of the
publisher when it is out.
Of course, the one wild
card in Asia is the North Korean missile program, but
that's a wild card all over since their missles will
soon be able to reach Chicago. And with famine and a
faltering economy, the first thing dictators like to do is
divert attention with a nice little war.
I've heard recently where Allstate has one of the
lowest overall expense ratios in the industry now. Geico
was 5% lower. Each percent, though, represents a big
bunch of money to the bottom line.
this board a few months ago said Geico's renewal ratio
was in the high 70%'s, not very good. When you live
by price alone, you die by price. I would believe
ALL would be in the mid-high 80%'s.
As far as
underwriting ... they either have a very different view of the
statistics, or are just willing to throw a lot of money at
the business today to grow market share. Geico, for
example, will take our non-standard customer straight into
their preferred (even with 1 cite) without a problem
(at least for now). Two people I know of have made
this change to Geico. We'll be getting them back next
year once they meet our requirements of having had
prior "preferred" coverage. On this board we always
hear from either company people from agents or claims;
how about a word from an underwriting person? I was
told by an underwriter once that ALL is one of the few
companies that can track the origin of business into the
and whether it came from a "preferred"
or "non-standard" prior.
The overall losses in
"preferred" are weighted heavily by losses from the customers
having come from the prior "non-standard" side. So the
decision was made to make the requirements for
"non-standard" prior into "preferred" much more difficult in
order to hold down losses and therefore future rates on
"preferred". We've been doing this for years and by now you'd
think there'd be enough stats to see if this decision
was valid. No other company I know of has followed
ALL's lead in making going to "preferred" as difficult
as ALL, e.g., see Geico example above!
always thought there must be some awfully compelling
valid statistics for ALL to have made and stuck with
On one hand ALL's had this 8-10%
growth goal, yet continues to make qualifying super
difficult. Grow profitably, not just grow.
interesting subject ... let's hear from an underwriter.
The problem with this argument is that GEICO's
underwriting expense ratio is much lower than Allstate's -- I
forget the actual number, but I think it is about 10
points lower. When LAE is taken into account, the gap
becomes even wider.
So as long as GEICO is not a
much worse underwriter than ALL, and assuming GEICO's
service, fraud prevention, etc. do not lag far behind
Allstate's, GEICO can most certainly get away with this
strategy without losing older insureds over the long-run.
A hint at how GEICO might be performing along these
criteria would be to look at the company's persistency
rates relative to Allstate's. If they are similar, this
would seem to provide evidence that GEICO is doing fine
in these other areas. Actually, if Allstate's
insureds are older on average than GEICO's, then I believe
that one should expect a lower persistency rate for
GEICO all other things being equal because I believe
that younger auto insureds are more likely to switch
carriers than older ones.
Any comments appreciated,
especially ones about persistency.
of companies that we'll have to take a "wait and
see" attitude with. After all, they are mimicing
GEICO's underwriting and pricing stategies and they too
are a one-bullet gun in that they only sell
One might ask, if Allstate is so severely overpriced
on young drivers and other companies are taking them
in left and right, without regard to underwriting
guidelines (which is definitely NOT the case it appears to
be) what will be the overall effect on the loss
ratio? After all, they take in less in premiums because
they don't have to pay an agency force. But, the cost
of each claim is relatively the same from company to
company. Parts and labor costs are the same.
Administrative expenses may be less but parts and labor are the
Young drivers, as we all know, are the most volatile.
So, it defies logic that one or two companies are
going to take these higher risks on their books without
restriction. I believe they call it anti-selection, don't
Kris brings up some good points. Young drivers can't
be developed into long-term customers by either of
these two companies because they can't meet their
long-term insurance needs.
I, for one, can't wait to
see how it all plays out in the long run. I can smell
a consolidation of the insurance industry in the
wind and usually that means the big get bigger.
and neither does Ed Liddy.
I guess we will
have to wait to see if the GEICO gamble pays off.
However, first off, I am not so sure you will find that
much of a better deal for young drivers with
Logic tells me that if you get more than your fair
share of this market by "underpricing" it you have to
have higher rates on other classes of business
(married, families, more expensive cars, increased incomes,
etc.)....Now with the GEICO business model of turning
insurance into a commidity without having an agent to
service the policy an needs of the customer those that
choose GEICO are probably more price sensitive. If they
get a good rate as a young driver they will be with
GEICO then, but as they age the better deal will be
elsewhere. So you lose money while the drivers are young and
then they leave you when they get to the time in their
life cycle when they are relatively "over
Also, another reason this is a bad strategy for GEICO,
but might be more successful for ALL.....GEICO is a
one-trick pony. Auto Only......when these young drivers
they are attracting age, buy a home, have children,
need to protect assets with a Homeowners Policy, an
Umbrella policy, a life policy, variable annuities, Can't
get this with GEICO. This geive even more likelihood
that the young driver will say yes to GEICO for the
rate break as a youngster, but will leave own the
So as I said earlier, Mr. Buffet does not
set the rates, but if he did and thought this was a
winning strategy then my answer to your question is YES,
he is stupid. (I guess you might be seeing that is
the GEICO combined ratio though).
That website (www.wallstreet.addr.
com)you told me about was really the best financial
website ever! specially the STOCK PICKS FROM ALL OVER THE
NET section was very useful for me.
portfolio tracking and messgae boards I prefer Yahoo
I'd like to weigh in on this business of ALL's
higher rates for young drivers. I'm not going to argue
the demographics, but is it competitive? GEICO is
capturing younger drivers with better rates and clever,
cartoony ads. It is said this is bad underwriting that
will bite them in the end. But is Warren Buffett
really that stupid? I'd wager he's smarter than Ed
Liddy. He's getting an entire younger generation, which
will increase their incomes, get married, buy extra
and more expensive cars, have families, etc -- but
who won't be buying Allstate -- and people tend to
stick with their insurers. Seems to me that a long-term
Blue Chip investment should be in a company that looks
to the future like this.
By the way, thanks
for the lack of insults. With twenty million
customers, some claims are Bound to slip through the cracks
and not every complainer is a crook. At that time,
injured parties have the RIGHT to complain in our free
society. They also have the right to hire a lawyer,
although Allstate seems to think this is a crime. If you
read the Constitution, we have a Purposely adversarial
justice system. The Founders knew you can't trust any
large institution, corporate or government, to look out
for your own best interests. Thus, we are allowed our
hired guns. It may be unpleasant and costly, but the
alternative is dictatorship. Maybe Allstate should just
factor in this cost of doing business in a free society,
instead of acting outraged and giving out all this "evil
lawyer" brainwash, or worse yet acting as if the
policyholder has done something Wrong by listening to all this
bad press and taking the initiative to protect his
Yes, it would be better if things were
settled amicably, but for every case where an individual
has called in lawyers first, you can find one where
Allstate (as in our case) has called in lawyers first. We
were dealing with bald lies from their lawyers for
nearly a year before it hit us that we should get one --
duhh -- so much for "litigous" policyholders. Most
people Don't like having to hire a lawyer and if given
even a vaguely fair break will avoid it.