Mercury’s fourth quarter wasn’t bad but with earnings of $0.59 per share it missed analysts’ estimate of $0.67 per share. Their income statement was negatively impacted by $10M in claims due to wind damage in California as well as a re-estimation of their losses from the previous quarter, a charge of $18M on the income statement. Other than that the company has improved its financials, overall. Compared to the same period last year, the company has improved its earnings dramatically from negative $0.15 per share.
As a Los Angeles base insurance company, Mercury does a lot of business in California; and, according to Morningstar, they have high customer retention of 95% in California. Yet profitability for the company has not excelled; Morningstar believes their insurance policies are priced too low.
What’s more, the insurer relies on their independent agents who act as full-service brokers to customers. The recent trend has been for direct marketing online, something Progressive insurance has executed well.
Morningstar values their stock at $40 per share. Currently, the stock is trading at $43.35, down nearly 4% on the earnings announcement. Mercury General is an insurance holding company specializing in the property and casualty segments on the market, mainly selling auto insurance in 13 states through its network of independent agents. The company is headquartered in Los Angeles and is one of the largest publicly traded companies in the city.
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