Q3 2022 Mediaalpha Inc Earnings Call

Percent complete or do you think any of the carriers are close to being done.

That's the first one and I'll ask a follow up.

Okay.

Hey, Michael it's Steve.

Thanks for your question.

Yes, we thought that something similar.

I think overall, what we're seeing isn't that different from what we talked about in the past, which is that I think as we're seeing from the Q3 results from a lot of the P&C carriers.

Carriers are at very different stages of achieving rate adequacy.

Certainly there is some carriers who feel like they are there.

We've seen them lean back into growth mode, increasing our marketing investment and certainly here notwithstanding the effects of hurricane in and the pullback that we alluded to in Q4, we continue to expect to see quarter over quarter increases in their marketing budget as we get into 2023.

I think it's fair to say that the majority of other carriers, though.

Are still in the middle of the process of getting their rates increase to achieve rate adequacy.

I think what we're seeing is that <unk>.

Some of the thoughts that we had very early in this period.

Very different stages, and so what we're expecting and planning on is really through 2023 on a carrier specific basis.

Market recovery to happen marketing budgets to return and so I think it's fair to say that through 2023 were expecting recovery to start but that it might be a little bit lumpy non linear because it'll be based on each specific carrier.

Achieving rate adequacy.

Okay. Thanks for that and that's helpful and then just.

With experience with Hurricanes, if this had happened and it happened in a vacuum like how long would you typically expect to hurricane major hurricane too.

Impact carrier spending is it a quarter or two quarters or what are your thoughts there.

Yes.

I think thats, a great question and so I.

I think that the I think the impact.

As largely near term I think it depends on where the carriers are.

The overall combined ratio for the year and so I think what youre seeing with respect to the carriers, who achieved rate adequacy and pulled back in Q4 due to the effect of hurricane in I think the primary driver behind that was really to get their combined ratios in line and hit their targets for the year and so I think that reaction isn't unlike what you.

You'd see in a normal market period.

Again it.

It depends on the severity of the event.

As well as what carriers are expecting in terms of our overall combined ratio for the year.

Overall, as we think about how the market is going to recover.

Certainly the effects of hurricane Ian could linger into early 2023.

But with the discussions that we've had with carriers.

Cheap rate adequacy, and starting to lean back into marketing the feedback has been that in Q1.

Our lean back in and certainly by the time that the other carriers.

So suite later in the year, we don't anticipate that hurricane Ian and the effects of hurricane in.

We will continue to have an effect.

Okay. Thank you Steve.

Okay.

Yes.

Again for questions, let us star one at this time, we will hear next from Daniel gross flight with Citi.

Hi, guys. Thanks for taking the question.

Just on the health segment for a little bit you mentioned youre seeing strength in the under 65 market in your shareholder letter given.

Given the extension of subsidies.

Can you give us a general idea of how big that business is as a percent of your overall health business.

And any thoughts around transitioning.

Our recent acquisition of <unk>.

The customer help her team.

From more of a Medicare advantage focus to under 65 focus.

Yes.

This is Pat Thank you for the question Dan.

Hey.

On the breakdown of our health vertical between Medicare and under 65, that's not a number that we disclose the thing I can tell you is that it's a healthy mix between the two and it's not like it's $80 <unk> skewed one direction, but it's.

Very healthy blend of the two.

<unk>.

And.

As we think about the customer help her team acquisition that business was pretty heavily focused on Medicare when we bought it.

Care market I think is you with most investors now has been relatively challenged over the course of this year part of the deal thesis on that was that the capabilities. They have in Medicare could be extended to other areas for <unk>.

Area, we chose for that is under 65 health.

No.

The team at <unk> has been working there we had real revenue with.

Rail gross profit.

In that.

In that area in Q3.

Sure.

The third day of ODP right now in the business is seeing kind of the expected uplift you would see in that period and we.

Kind of remain long term bullish about the opportunity for CHP, both in Medicare and other verticals like under 65 health.

Got it okay, Okay, and all of the carriers themselves have made comments that they're investing heavily in their own sales force and their own lead acquisitions.

Im just curious if you can provide any commentary around that.

The strength <unk> seen out of carriers versus broker and how you think that's going to shape up not just this year, but over.

Over the coming two to three years.

Yes, yes, and yes.

Yes. This is Pat again on it the thing.

I would say is that generally across our health vertical in general and probably Medicare in particular.

Carrier spend has been quite a bit stronger than broker spend.

For us and I think that some of the challenges the broker industry.

Our well known.

And as we look forward, we think that is a trend that will probably continue in that.

Carriers are looking to Medicare advantage to be a big growth area for them I think as I get reports from you and some of your peers. That's always one of the $4 five bullet points in the summary is Medicare advantage growth. So clearly they are focused on it.

They want to have direct relationships with with their end customers and I think the.

The benefit of the carriers kind of gaining in importance is that we have this playbook and we've executed it before at PNC for P&C was a space where brokers were relatively penetrated in.

<unk> seen that.

Customer acquisition efforts skew very very heavily to carriers over time, and we expect that.

Carriers will continue to rise and importance in the health channel, Although we believe that over time brokers will continue to be.

Very valuable to consumers that want to upfront carriers.

Got it I appreciate the color thanks, guys.

Thanks, Ed.

We'll hear now from Meyer shields with <unk>.

Okay.

Thanks, Good afternoon.

One I guess, if we listen to most of the auto carriers over the course of the third quarter. It sounds like there was this recognition that things are worse than they thought.

And I'm wondering how that corresponds with what youre seeing from them in other words sequentially.

Interest from demand partners going from the second quarter to the third quarter.

Yes, Hey, Mark it's Steve.

I think that I think that generally resonates with us and what we're hearing from our carrier partners.

Referring back to my earlier comment I mean.

There are.

Some carriers, who feel that they achieved rate adequacy.

But I think that the majority of the carriers that we're working with I think they are still working through it and we've seen some positive news on that front used car prices coming down.

California, proving its first rate increase I believe and in two years I mean, certainly we see those as positive signs and then we see the continuing progress of the carriers are making in getting state by state approvals, but I think overall, it's fair to say that.

The comments you made about the auto insurance carriers.

And how difficult with market environment, certainly resonate with us and matches, what we're hearing from them directly.

Okay.

Perfect second that's sort of an abstract question, but it looks like her opinion.

May.

For a return too.

A more actuarial basis for pricing homeowners in Florida, and I'm just wondering.

What is it your sense that competition from Florida business was lower before all of the Covid impacts and supply chain with Florida sort of an underperformer in your marketplace.

I think it's safe to say that.

Okay perfect.

If that pans out and just one last question.

The $8 6 million impairment of cost method investment does that have anything to do with the.

Other vertical.

Clothing.

And sorry Meyer it was the cost base the cost base this impairment.

Yes.

Yes.

We have a an equity investment that we made several years ago and it's a company kind of.

In the space and we were holding that investment at book value and given kind of some of the challenges in the P&C industry, we went through an exercise and we.

We had a partial impairment of that investment. So we kind of wrote it down in something resembling a mark to market on that.

So that's a minority investment in cooperation.

Alright, no nothing to do with it.

Alright, I'm sorry about that thank you.

Hey, Thanks, Brian .

And once again for questions that is star one at this time.

Okay.

Okay.

Well hear now from Ben Hendrix.

Yeah.

Hi, Arpin Hendrix Tomorrow.

Yes, Hi, Hi, guys. Thanks, just.

Just a quick question going back to the under 65 market on the healthcare side.

This past quarter, we've heard one of our coverage companies bright helps get out of the of the ACA exchange market altogether, and we've heard other larger carriers kind of expand our footprint has that changed at all your trajectory your client mix and in your outlook overall for that for that market. Thanks.

For increased interest rates do you guys have hedges in place on that.

Yeah.

Yes, it's floating rate debt. So it's effectively a LIBOR spread that presumably will be transferring to sofa and.

In the near future.

And so as rates go up.

On the floating rate debt go up we typically kind of locked in the rates quarter by quarter is what we've been doing that thus far this year. So.

Interest expense has been going up but we don't have any long term hedges in place.

Thank you guys.

Thanks, Brian .

Thanks.

And with no other questions at this time that will conclude today's conference. We do thank you all for your participation and you may now disconnect.

Okay.

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