lifornia that of a
company? I don't have to worry about recommending
this company to customers do I?<<
as I know their reputation is fine. Do you know how
their rates compare to Geico in areas where the two
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Ladies and Gentlement for your
I have to say, I like this company. I suspect I
have at least several months to try to find problems
with it. If I do, I'll let you know; if I don't, I'll
let you know- and I'll buy.
Thanks for the responses, it is nice to read some
intelligent posting. I like to go these boards sometimes to
get a general sentiment or even links to articles and
whatnot I ordinarily would not run across. Most boards
are really full of too much garbage. I will continue
to post as I see necessary, but I think what is
happening right now is fairly predictable if you follow
this industry, and what is going to happen over the
near term is fairly predictable. It's a chance to
truly get a great bargain if you are a long term
Previous comments very appropriate. There is MUCH
competition in the California insurance market (as an
insurance broker and MCY shareholder, I know this). As a
result, even though MCY's rates are much lower than most,
people aren't bothering to shop because rates are
declining with their existing carriers. At the
shareholders' meeting, Mr. Joseph anticipated approximately one
to two years for rates to start moving up, thereby
causing people to get upset and shop again. That's when
he feels the greatest potential will be for MCY.
The question regarding how long George Joseph stays
with the company came up at the meeting. He noted that
CFO, Michael Curtius (spelling?), is the one who
currently is the hands-on man now. Mr. Joseph spends his
time dealing with legislation and lobbyists, the
so-called "ethereal" endeavors. He said he has no worries
about the company and that he has been asked this
question since 1962.
if you look at mcy's history they have grown very
rapidly once the market gets "hard". there were times
when they doubled or tripled their premiums in a
couple of years in the 80's when this happened. many of
their california competetors are now operating with
close to or over 100 combined ratios. the trough in the
cycle may be closer than any of us suspect (perhaps
next year). just look at the hmo biz, calpers is
paying 10pct more on next years business. this alone
will force medical costs up for the auto insurers.
some return of royal globe is almost certain. it
appears the enviornment is quickly going to get more
hostile. anything that makes life more difficult for the
industry is good for mcy because their combined ratio
advantage. one of these days they may even raise prices
which will cause premiums to grow faster than unit
growth. who knows, it might not take 5 years, but they
will be there to profit whenever
Here are my thoughts on Mercury and the industry
in general. As everyone knows, premiums are dropping
for the first time in something like 20 years.
Companies have "realized" that this can be a profitable
industry, so they come in by the droves to get a piece of
the action. It's a cycle. As a result, among other
causes, rates go down, which hurts profits. At the same
time, because competition is getting so stiff,
companies must advertise to remain in the game. This
further hurts profits. I think that probably the smartest
thing an insurance company can do right now is to write
as many policies as possible, primarily because
these things are much more profitable after the first
year. However, don't write them to where you hurt
yourself down the road. Eventually things will return to
"normal" and some of the newcomers will either go out of
business or get swallowed up. It's tough right now and who
knows when things will turn around. I don't make
predictions, but I believe things will be tough for a bit, but
they will come back. It's in these times you want to
get a good quality insurance company that knows how
to handle themselves.
As far as Mercury
goes, I think they are a strong company with strong
management. They will be fine, but profits will be hurt for a
while. I think they have tremendous room to grow.
Especially in their newer states. Heck, even in California.
CA has 10% of the nations drivers, and I believe MCY
has about 12% of the market there. I may be wrong on
those numbers though. But all in all, they know what
they are doing. I think they have a tremendous future
ahead of them. I invest long term (at least 5-10
years), so it does not bother me to buy now and if the
price goes down, buy more and average down. But these
are just my thoughts, take them for what they are
worth. I enjoy intelligent conversation on these boards,
I wish there was more of it.
Interesting series of thoughtful posts. Thank you
I am still questioning:
Can MCY emerge as a
dominant player, or will they be marginalized by direct
How long can Mr. Joseph continue? Is the existing
management team "deep" enough?
My hunch is that a
person has at least a couple of quarters to watch this
situation develop (absent a Buffett buyout, that is) and
since I have just IRA money to do this with I would
like to be very, very careful.
No, I am not
much of a gambling man either, I guess!
for your help. Good investing to you-
The greatest advantage to the agency only policy,
besides having a loyal sales force, is that the agents
can do "front-line" underwriting. Certain profiles
don't make sense (e.g., person from low-income
neighborhood, who is unemployed, driving a Ferrari with no
lienholder). The carriers who feel they can write from a
purely objective standpoint will not be able, at least
in California, to discriminate against this type of
risk; however, an agent who senses the potential for
fraud will refuse to write this risk with a valued
carrier. This is an example of how MCY can pay agents
15-20% and still have lower rates and loss-ratios than
the direct writers.
I would think Progressive or Allstate, I believe
they are the biggest agency writers that would be able
to swallow up MCY. However, I'm not a bettin' man,
unless the odds are drastically in my favor. But I
believe all of this speculation came from a "non-answer"
in the conference call, which does not mean much.
I've been behind the scenes on a few conference calls,
and there certain things management either does not
want to discuss or does not know about. Investors tend
to look into things quite considerably.
company looks really cheap right now. I originally did
not like their agency only policy, but I think
management has great integrity and the company will do well
into the future. Although I think the near term will
be rough, as it will be for all auto insurers, when
rates rise again, the "new" players in for a buck will
be shaken out and the best ones will come out ahead.