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» Mercury General Corp. Q3 2008 Earnings Call Transcript
On a sequential basis, the combined ratio deteriorated slightly as severe windstorms in California during the quarter negatively impacted our results by $10 million. In addition, the fourth quarter tends to have higher loss costs from increased usage as well as more wet weather.The fourth quarter results were aided by a decline in the expense ratio. The expense ratio in the quarter was 25.7%. The expense ratio in the quarter was unusually low, primarily due to reduction in profitability-related accruals, including contingent commission and employee underwriting bonus accruals.
Going forward, our current expectation is for the expense ratio to be in the 27 to 28% range. Premiums written in the quarter increased by 1/10ths of 1%, and for the year, premiums increased by 8/10ths of 1%. 2011 marks the first year since 2006 that companywide premiums were increased. In December, we implemented a new automobile fast plan in California. The revenue-neutral plan improves our segmentation, and results in more refined pricing. Although still early, our new business sales have increased year-over-year in the mid-single digits, and our retention has not experienced significant deterioration. It has now been over six months since we sold our first policy online in the state of Georgia. We are pleased by the technology we have developed that allows for the sale of new business online, and also includes our agency partners in the transaction. Our plans are to expand this capability to other states, and we expect to have another state selling online by the end of 2012. With that brief background, we will now take questions. Question-and-Answer Session Operator (Operator instructions). Your first question comes from the line of Meyer Shields of Stifel Nicolaus. Meyer Shields - Stifel Nicolaus Thank you. Good morning, everyone. Gabriel Tirador Good morning. Meyer Shields - Stifel Nicolaus Gabe, can I ask you first to quantify what you see as California Auto Loss Cost Inflation right, now? I guess, the overall trend?
Gabriel TiradorTed, do you want to… Ted Stalick Hi, Meyer. We’re seeing some single-digit increases in frequency and general flat to small increases in severity. Meyer Shields - Stifel Nicolaus And I guess no conclusive updates from your communications with the departments about your rate increase or the filed rate increase? Gabriel Tirador No, there’s been some correspondence going back and forth. Robert, do you want to add anything to that? Robert Houlihan No, there’s really not much to add on our auto rate filing at this point. It’s still under review by the Department of Insurance. Meyer Shields - Stifel Nicolaus Okay, and then last question if I can, I appreciate the update with regard to the Georgia Direct Auto Sales. Can you talk about whether the loss experience is matching your expectations or how well that’s performing? Gabriel Tirador I’ll let Robert answer that question. Robert Houlihan Yes, because it’s just new business for six months, we really don’t have a credible amount of premium at this point, but we’ve been tracking our frequency and that’s been in line with our expectations. Meyer Shields - Stifel Nicolaus That’s great. Thank you very much. Gabriel Tirador Thank you. Operator Your next question comes from the line of Alison Jacobowitz of Bank of America/Merrill Lynch. Alison Jacobowitz - Bank of America /Merrill Lynch Hi. Thanks. Can you just first confirm in the quarter, was the adverse development, was it 7 million? I just want to make sure that I’m tracking the quarters correct. I know you gave the year-to-date number in the release. I didn’t see the quarter. And then the second part of that is, can you just talk about what drove the adverse development in the quarter? Gabriel Tirador Sure. Yeah, we report the 18 million year to date, which is on 2010 and prior accident reserves. So if you want the amount for the quarter, you subtract last quarter’s year to date and get the 7 that you just referred to. So you’re correct there. There’s really several moving parts in the development. Year to date, most of it’s coming from California, BI, increases in severity from the 2009 and 2010 accident years. Does that answer your question? Read the rest of this transcript for free on seekingalpha.com