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Mercury General Corporation Message Board

  • donaldoops donaldoops May 5, 2004 2:13 PM Flag

    Comments on earnings

    It seems, based on the recent earnings, that MCY is on the right path. I realize that future interest rates is a big unknown...but I remain optimistic about this company.

    Just wondering how the other MCY Gurus feel about the earnings? I have not heard from JFH or some of the more active posters from a few years ago. Anyway, I am interested in other comments.

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    • Regarding MCY's business model, it's one thing to have taken advantage of years of LA County being an underserved market versus entering generally well served markets such as FL. MCY doesn't exercise any greater control over PIP loss cost trends than anyone else, particularly Progressive. Let's come back to this conversation when the Sunshine State returns to PIP trends in the 18+% range.

    • alright mcyla,

      you win. I actually think MCY is ok. The Lynch downgrade addressed flat premiums into higher claim costs going forward. The same hold true for TW. One TW benifit is they are spending around 1.00 per share in advertising up from .15 when they were not trying to grow. Thus, if they get to a point in revenues that they are comfortable with they can simply scale back adds to say 50 35 million a year and generate .50 in additional earnings.

    • Simba, now you're reaching. Mercury has over 40 years of profitability. At no time during that period has Mercury played with pricing or reserves. The next quarterly earnings are reported in a couple of weeks. We'll see if there is any evidence of what you're saying. Given that almost all auto losses are fully developed within about 3 years, what you allege can only have occurred in the last couple of years. Mercury blew by TW well before then, and the Florida profits for the first few years of this decade are also there, fully developed, for you or anyone else to see. Mercury does not have a monopoly on efficiency, but it does have an excellent model.

    • earnings will be great this year...4.15 ish problem is next year..same write insurance (no agents.. instead 1-800's and internet) is on the move..check TW..competing directly against MCY in Cali and building a center in Dallas..Earnings are expected to GROW 12-20% this year and next and through the decade, yet the PE and PSR are almost equal to MCY which is at an earnings peak (check the valueline) money is on TW at this point...(the market is discounting the earnings at MCY, ie...12 times earnings...LISTEN UP... THERE IS A REASON...THE REASON IS SLOW AND NO GROWTH GOING FORWARD...or do you know more than the market?

      • 1 Reply to notsimba2000
      • Simba is a long-time advocate of TW, and is known on that board for consistently finding some way to put a positive spin on any TW news. I would ask Simba to consider a couple of things. First, fifteen years ago, MCY was half the size of TW. Now we are more than twice the size of TW. If the future is in direct, the recent past certainly hasn't been.

        My other point is that MCY's Florida operation by itself is growing faster than TW's nationwide operation. Perhaps the present is not with direct either.

    • why thank you mr opps, i didnt think anybody remembered. if you want my 2 cents worth..the earnings were fine. i cannot disagree with merrill lynch's downgrade. the business will slow and become more competetive. if i was in the business of predicting stock prices like the analyst, i too would guess the stock may mark time for a while. unlike 1998 when the analyst (same one) downgraded mcy and the stock began the desent from 70 to 20, my guess is that mcy wont fall very much. back then the stock was 5x book and under a 1 pct yield. it is far cheaper today. unfortunatly, unlike year 2000, today there isnt that much around (including mcy) that is realy cheap. i still own mcy (but not as much as in year 2000). i have been accumulating a rather large position in the oil refiners. specifically vlo. i believe they are probably in for a 10 year run and, as hard as i try, i cannot imagine a scenario where i probably wont make a fortune on them. thanks jfh

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