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Mercury General Corporation Message Board

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  • freezemotion freezemotion Mar 1, 2011 1:48 PM Flag

    MCY Down - Why?

    Raymond James cut its stock-investment rating on home and auto insurer Mercury General Corp. (MCY, $39.26, -$1.88, -4.57%) to underperform from market perform, based on valuation and underwriting challenges in Florida. The firm said it expects results to continue to be hurt by Florida homeowners' sinkhole claims through 2012

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    • I question the reasoning but not necessarily the conclusion. Leaving FL will affect written and earned premiums, but the losses from sink hole claims should be reserved as of 12/31/10. You could have other impacts, like people with home and auto insurance will move their auto insurance if their home insurance is cancelled. But insurance is all about the combined ratio and investment returns. Cats radomly impact insurers depending on their risk profiles. If MCY can move their combined ratio back under 100 and the investment climate remains sane, wekaness could be an opportunity for those with a longer horizon.

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