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Mercury General Corporation Message Board

  • questionus questionus Apr 14, 2000 1:06 PM Flag

    Front Page Los Angeles Times, 4/14/00

    Los Angeles Times reports that although Chuck
    Quackenbush can not, by law, run for another term as
    California's Insurance Commissioner, Mercury General Corp.
    contributed $50,000.00 to Chuck Quackenbush's campaign
    organization. Why would Mercury contribute $50,000.00 to Chuck
    Quackenbush when Quackenbush can not run again for his
    present elected position as California's Insurance
    Commissioner and neither has Chuck Quackenbush publically
    announced that he is going to run for any elected post in
    California. What could possibly be the motive for any
    corporation for making a $50,000.00 campaign contribution to
    anyone who is not running for an elected position and
    especailly someone who can not run again for the position he
    is currently in. We recommend investors and fund
    managers take a "watch and hold" approach, at least until
    after California's attorney general and the insurance
    commission has completed its investigation into the
    activities of Chuck Quackenbush; especially after the
    resignation of the assistant insurance commissioner Grays
    announced yesterday.

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    • i also happen to own aig from 1991 and xl from
      their take over of mid ocean. i also own mkl which is
      an interesting company and berkshire so i know a
      little bit about the territory. i will say this: charlie
      munger, berkshire's vice chairman (and one of the
      brightest guys you will EVER meet) made some interesting
      comments about mcy at his own company's annual meeting. i
      happen to agree with everything he said. for one he said
      joseph is the smartest guy who ever entered the
      insurance business (hank greenberg may be tied for this
      one). above all else, this is an industry that
      magnifies the strengths or weaknesses of management. i am
      very happy to own mcy. the others (aig especially)
      earn lower roe's and are much more expensive. mcy's
      earnings come tommorrow and judging from tw's they are
      likely to be worse than expected. but i strongly suspect
      their combined will be much better than tw's 104. the
      business is getting interesting and i would hitch my horse
      to joseph and his right hand mand curtis (spelling
      is not my strong point).

    • Mercury is indeed one of my two premier companies
      in my agency, and I really enjoy doing business and
      placing business with them.

      I appreciate their
      strict underwriting because from past experience I know
      that obtaining a proper rate for a risk is paramount
      to making money on the P&C side of things. And quite
      frankly, MCY is not the proper carrier for everyone...and
      that is what is fun about the independent agency
      system. I've got something for almost anyone. But out of
      genuine respect for MCY and its motives, I wouldn't dream
      of using it as an adverse selection

      Just because I think MCY may have challenges in the
      state by state expansion doesn't mean that I think it
      will be doomed to failure.

    • workformcy, jfh41, sunseter,

      Appreciate your answers on MCY. Too many companies loosen
      their underwriting criteria for the sake of expansion,
      so MCY's expansion may take time if they have to
      establish relationships with agents, train them in the MCY
      way, etc. I think that PGR tried to grow too fast, in
      order to maintain high revenue growth, and is now
      paying for it. Maybe it will be different with MCY due
      to having majority shareholders who are more

      In terms of investing in P&C insurance companies,
      there just are not that many companies showing
      consistent underwriting profits. Probably AIG, PHLY, and
      maybe ACL and XL. Any others?

    • Mercury's success in California is a result of a
      very strategic business plan. Mercury does 2 thing
      really well:

      1)They identify where it's
      profitable to write business, then lower the rates in that
      community. They do the opposite in the less desirable
      communities. An example would be the white collar business man
      living in Orange County will abandon Allstate to save
      $500.00 dollars a year, versus the retired postal worker
      living in South Central L.A. leaving Mercury to save
      $100.00 a year. Mercury does not get the "racist, red
      line" tag that Allstate, State Farm and Farmers would
      get from various consumer and/or civil rights groups.
      Mercury is small and unknown, they completely disregard
      image within the community. Allstate, State Farm and
      Farmers depend on reputation. Allstate's radio ads are
      all about providing the best service, working in the
      community, fighting fraud, ect... . Mercury's radio ads are
      about saving YOU MONEY NOW, leaving that big fat
      insurance company.

      2)Mercury controls cost very
      well. Like I said in my prior post; Mercury is a
      virtual training ground for future Allstate, State Farm
      and Farmers employees. This is something I can say
      with first hand knowledge, my wife has been an
      employee there for almost 7 years now. There's no doubt in
      my mind that she could abandon Mercury for one of
      those big fat insurance companies listed above and
      instantly receive a 15% raise. She won't do it though
      because she's a large fish in a very small pond. She'll
      be in management soon...that's when the payday will
      occur. I will say this, Mercury is having a very hard
      time retaining employee's, most are just not willing
      to stick around for 7 years.

      As for agents
      being sold on Mercury...just not the case! Mercury is
      the Crown Jewel in appointments; furthermore many
      agent's are just flat to NO! Either they're not
      experienced enough in the Mercury culture, or their agency is
      not strategically located. With this said; it's
      unlikely they'll have a problem finding eager agent's in
      these new state's.

    • I understand your concern. I'ld like to let you
      know that the expansion into TX, NY and VA is
      happening in a different way than Calif, Illinois or
      Georgia. MCY purchased a established agent in Texas with
      20+ million in written premiums and is using that as
      a base to begin operations. From there on, they
      will use nothing but independant agents committed to
      writing business the way MCY has in the past, rigid
      underwriting standards. NY and VA will focus on building
      contacts with PGR agents and the like to compete directly
      with like insurers. This strategy has worked out
      somewhat in Florida. Tighter reigns on the claims side
      will be needed as the individual who heads up our
      Florida office dropped the ball.

    • matches mind. Another company that has done well
      over the years with contrary moves is United Fire. You
      sometimes have to be willing to put your Bests' rating in

      And, to be a contrarian you have to have
      discipline in the underwriting area.

      When you are
      putting on buckets of low margin business it can't be "no
      margin" or losing business.


      the secret to MCY's success is the number of "hoops"
      needed to write a risk.

      If agents aren't willing
      to do the extra work needed to partner with a
      consistent company they will move one to "kinder gentler"
      markets. When those markets have loss problems, and have
      to raise rates... the agents pay the price for not
      being with a company like MCY.

      If agents do
      everything they can to help the company succeed good things
      happen... and vice versa.

      If companies put the
      agents in adversarial positions bad things happen... and
      vice versa.

      Insurance is a complex business.
      But the basic human relationships are quite simple.

    • My concern with MCY's expansion is that what has
      worked so well in SoCal may not work as well in NY & TX.
      I agree that the timing of the expansion is good,
      but entering the NY and TX markets will not be very
      easy (although what can be worse than CA?). The key
      factor to getting agents to sign up may be commission.
      How does MCY's commission rates compare with other

    • i think you hit the nail on the head. rather than
      buy off the internet would you make a trip into your
      local agents office to save hundreds of dollars? my
      guess is yes. the challenge is to get the word out. as
      for agents willing to put out the extra effort, look
      at the pgr board or the all board. it seems a lot of
      agents are desperat for a good insurer who treats them
      well and can offer a good, well priced product. with
      so many companies trying to marginalize the agent my
      guess mcy will prove their salvation.

    • The challenge will be to position the company's
      rates better than the competition and then line up
      agencies that are willing to co-operate with the extra
      effort required of a Mercury agency when selling their

      To move into a mature market with just so-so rates
      and products and expect the agents to fully buy into
      the tight underwriting that is part of Mr. Joseph's
      master plan will doom the venture. Mercury's big growth
      came in Southern California when with innovative and
      exacting underwriting, Mr. Joseph hit pay dirt with rates
      that blew away the competition. Customers were happy
      to sign their names six or seven times to an
      application when it meant that each signature was worth a
      hundred dollars in savings. However, when a client is
      only saving fifty bucks, having to write ones name
      five times and excluding the 6 year old children and
      room mates gets a bit tedious when other companies are
      not as strict.

    • in the very first paragraph of this years annual
      report, mr joseph talks about the need for prudence
      sometimes in this business. the last year or two has been a
      time of prudence. i remember back in 93 or 94 after
      they settled prop 102 problems he bot a building in
      brea and said they were in the best postition ever to
      expand. this was a time of uncertainty. after a long time
      as an investor in this industry i believe the great
      companies "dance where angels fear to tread", in other
      words they expand aggresivly when others are
      retreating. would you have them act, like all the other
      companies, expand when business is good and one has to
      reduce rates to nothing to attract business? or should
      they aggresivly go after business, using their
      competitive advantage in unerwriting, when others are
      retreating. i believe in the latter. progressive is
      retreating along with a host of others. now is the time to
      establish long term agency relationships when established
      carriers are no longer reliable. now is the time to cherry
      pick risks when the good ones arent being sought after
      aggresivly by everyone else. jmho

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