Edwin Walczak, VonTobel US Value Fund, during
Stock Pickers Club discussed MCY on CNBC. He says that
MCY is significantly undervalued. A summary of the
story is linked to the CNBC Specials page. Get there
pgr announced today a significant deterioration
of their combined ratio. coming after geico
announced the same. it seems if the industry wants to lower
prices now it will come out of the bottom line. how much
pain these companies want to endure in their search
for market share is the million dollar question. it
just seems to me the market wont harden until pain is
being felt. mr. joseph in a call last year speculated
that by the third or fourth quarter of this year
companies would experience significant financial
deterioration. it seems the script is being played out on cue.
in last quarters call he said what when mcy gets to
a 95 combined that the industry might be ready for
price increases. i sense todays pgr announcement is
some minor watershed event for this cycle. even the
best players are no longer "printing money" and may
have to begin restricting underwriting or raise
prices. the smaller less efficient players must really be
bleeding. i wonder if mr. joseph would comment on these
latest developments in the industry to his long
Geico is spending very heavily on advertsing in
relation to the past in an effort to gain market share.
The strategy has been very successful so far.
Policies in force are still growing rapidly. I don't think
we can gain too much insight into a turn in the
industry by looking at Geico's results. Their underwriting
results would leap signifcantly if they just cut back to
normal ad spending levels.
berkshire reported last night. geico's
underwriting profit is down to 20 million pretax. their loss
ratio jumped 6 points from 72 to 78.8. expense ratio in
low 20's. their premium growth rate is down to 18pct.
seems like the squeeze is already here in this
i agree that buying their own stock instead of
munis is a better deal. it has been frustrating, to say
the least, that they just havnt been buying. i
understand mr. joseph is looking at buying agencies instead.
he believes that this would earn a high return and
also a strategically good move. since i have a high
regard for his judgement in this business i am willing
to give him the benefit of the doubt, but not
forever. mcy is substantially overcapitalized and could
easily plow all the current earnings into buying back
the stock. look at last years annual report where he
states they have enough capital to double the business.
for the time being however i defer to his judgement,
he is one of the few insurance executives that in my
opinion knows how to count.
I read somewhere that the company stated that
they believe they can get a higher return on invested
capital with direct expansion of their existing business
than they can with stock repurchases.
they are doing the right thing.
could argue that they would be better of buying in
their own shares instead of making other equity and
bond investments with the float they generate from new
business. (up to a prudent limit of course)
I have broker urging me to use Mcy as source of
funds, trading, and would sure like to get the linkup
for your message about MCY being undervalued by the
analyst on stockpickers show. link you gave didnt work.