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Strategies & Market Trends : Buffettology

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To: Shane M who wrote (1681)7/16/1999 10:22:00 PM
From: Freedom Fighter  Read Replies (1) of 4660

Thanks for that very helpful overview of the industry.

I bought into MCY when it was selling at a discount to the prevailing industry PE ratios and at an absolute price that I was very comfortable with.

Mercury has been able to consistently produce an underwriting profit on its insurance while generating above average ROE. It has also grown premiums at a rate that is faster than average. Those are the main things I look for. Based on the comparisons I have done with other companies, I think it should sell at a premium to most auto insurers.

The California environment does appear to be hyper-competitive right now, so premium growth and earnings are depressed. However, the research I did I was quite comforting. MCY standard line auto insurance is favorably priced versus virtually everyone. They are also expanding their operations into Florida and a few other states and appear to be getting promising results. So I am hoping that despite the competition at present, they will do very well longer term.

Their size also makes them an interesting possibility as a takeover candidate for someone who wants a presence in California.

I think the investment is going to require some patience on my part but I also think it will be rewarding.

Thanks for the help,


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