Q4 2024 Mercury General Corp Earnings Call
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Good morning, and welcome to the Mercury General Corporation fourth quarter, 'twenty 'twenty four conference call.
All participants will be in listen only mode.
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After todays presentation, there will be an opportunity to ask questions.
Please note this event is being recorded.
This conference call may contain comments and forward looking statements based upon current plans expectations events and financial and industrial trends, which may affect Mercury General's future operating results and financial position.
Such statements involve risks and uncertainties, which cannot be predicted or quantified and which may cause future activities and results of operations to differ materially from those discussed here today.
Gabriel: I would now like to turn the conference over to Gabriel interior doors.
Speaker Change: Please go ahead.
Gabe: Thank you very much I would like to welcome everyone to Mercury's fourth quarter Conference call I'm, Gabe chaired our Chief Executive Officer in the room with me is Victor Joseph President and Chief operating Officer catch solid senior Vice President and CFO, Chris Graves, Vice President and Chief Investment Officer.
Gabe: Sure.
Gabe: Sure.
Gabe: Before we begin I'm going to say that our thoughts are with all those affected by the recent catastrophic wildfires in southern California.
Gabe: The wildfires have had a devastating impact on communities and individuals.
Gabe: Several of our executives, including many of those on the call recently toured altadena to see.
Gabe: It is heartbreaking to see so many people impacted by this disaster.
Gabe: In times like these our role as insurance professionals becomes even more critical.
Gabe: Our primary mission is to provide support and assistance to our insured when they need it most.
Gabe: I'm, so proud of our customer facing team members.
Speaker Change: Wavering commitment to helping our fellow California, who.
Gabe: Who have entrusted us with their protection.
Gabe: Turning to our fourth quarter and full year results 2024. It was a year for the record books. We are very pleased to report that our fourth quarter after tax operating income.
Gabe: Yeah.
Gabe: And our $98 million were the highest in the company's history.
Gabe: Combination of rate increases and moderating inflation helped drive down our combined ratio in the quarter to 91, 4% and our year to date combined ratio to 96% attach.
Catastrophe losses in the quarter were $41 million and added three points to the combined.
Gabe: For the full year 2024, which added five five points for the full year 2024 combined ratio.
Gabe: Excluding catastrophe losses, the combined ratio was 88, 3% in the quarter and 95% for the full year.
Gabe: Investment income after tax was $61 5 million in the court.
Gabe: For 2024, an increase of 15% and 18% over the prior year quarter and year respectively.
Gabe: Fueling the increase in investment income was an increase in average investment balances of 16% in the quarter and 12% for the full year 2024.
Gabe: Premium growth, coupled with strong investment and underwriting income.
Gabe: Chips.
Gabe: Net premiums written grew 16% to $1 3 billion in the quarter and 25% to $5 4 billion for the full year 2020 for the.
Gabe: The increase in net premiums written was primarily due to higher average premiums per policy from rate increases.
Our strong operating results helped fuel our growth.
Gabe: Especially in company history.
Gabe: Okay.
Gabe: As we look towards 2025, our core underlying business, which excludes catastrophe losses is poised to deliver good results, our personal auto and homeowners business, which comprises 88% of company earned premium posted favorable.
Gabe: 24, and full year 2024.
Gabe: For the full year 2020 for our personal auto business posted a core underlying combined ratio of 92, 1% in our homeowners business posted a core underlying combined ratio of 76, 1%.
Gabe: In addition, we expect 2025 investment income to be near 2024 levels.
Gabe: For underlying earnings to provide capital generation in 2025, which will help build back to capital loss from the wildfires.
Gabe: We.
Gabe: Our gross catastrophe losses from the January wildfires before our share of airplane losses to be in the range of $1 6 billion.
Gabe: Some of it is based on total insured values payout ratios and other data from previous large wildfire events.
Gabe: Pre tax net catastrophe losses are estimated to be 155 million to $325 million.
Gabe: The range of net catastrophe losses was determined based on various assumptions for gross losses.
Gabe: And levels of reinsurance utilization.
Gabe: In addition, reinstatement premium is estimated to be 80 million to $101 million and will be prorated between the first and second quarter of 2025.
Gabe: On an after tax basis, we estimate the net impact of wildfires to statutory surplus in the first quarter.
Gabe: 5 million to $295 million.
Gabe: However, as previously mentioned, we expect our core underlying earnings to partially offset the impact of the catastrophe losses from the wildfires.
Gabe: Yesterday, the California Department of insurance approved the fair plans request for a one BP.
Gabe: Company's participation rate in the fair plan is approximately 5%.
Gabe: Accordingly, we expect about a 50 million dollar assessing it from their fair plan.
Gabe: 50% of this assessment is recoupable via a temporary supplemental fee to policyholders.
Gabe: Fair play and losses can be added to reinsurance.
Gabe: Ted.
Ted: Thanks Gabe.
Ted: So moving on to the next slide.
Ted: Talking about reinsurance so.
Ted: The company's catastrophe reinsurance program provides 1.2 dollars 9 billion of limits on a per occurrence basis after cover catastrophe losses exceed the company's returns.
Ted: The company also has up to $20 million of coverage on our property excess of loss reinsurance treaty available to offset losses exceeding 5 million per property that attaches prior to the catastrophe limits.
Ted: And the company expects to use approximately $10 million to $20 million of those limits for wildfire claims.
Ted: Program, 1% of the reinsurance limit of the $650 million in excess of $650 million coverage layer was placed as parametric coverage that pays out based on industry insured values and pre determined grids within the fire footprint and the companies.
Ted: Asian percentage within that grid.
Ted: Well not be eligible for recovery.
Ted: As such $6 5 million of the 129 billion of total limits does not qualify for the Eaton nor Palisades fire.
Ted: The companys catastrophic.
Ted: Reinsurance treaty allows for the combining of events that occur within 150 mile radius as a single.
Speaker Change: Yes, each individual event is classified as its own catastrophic event by the property claims service a unit or a P. C. S. A unit of the shared services office each event can be considered a separate occurrence.
Speaker Change: In the case of the Palisades and Eaton wildfires, the pcs's designated each as a separate event.
Speaker Change: Buyers as two separate events as more information becomes available to the company, including any subrogation potential the company will evaluate whether it will consider the wildfires as two separate events.
Speaker Change: In addition, catastrophe losses from the California Fair plan are covered by reinsurance up to the limits provided.
Speaker Change: Yes.
We have paid $800 million out to our insureds.
Speaker Change: Primarily for 100% of coverage a dwelling limits.
Speaker Change: <unk> is up to 250000 on contents and advances for additional living expenses, we have built.
Speaker Change: Colors to our reinsurers and have received back actually as of this morning 531 million.
Speaker Change: To date.
Speaker Change: We have over $1 billion cash on hand, and the cash is currently earning 435%.
Speaker Change: Large cat events typically two thirds of the dollars are paid off.
Speaker Change: Near Mark 80% of the dollars are paid out.
Speaker Change: We are now past the largest part of the surge in demand for cast from this event.
Speaker Change: For our estimated ultimate losses, we have identified the total losses from claims being reported by policyholders on ground inspections and.
Speaker Change: Total insured value for each total loss, which includes dwelling limit additional replacement cost contents debris removal additional structures plants and landscaping and additional living expenses.
Speaker Change: We take the total insured values and apply payout percentages from other significant wildfire events such as the.
Speaker Change: To estimate the ultimate loss on all of our total losses.
Speaker Change: Typically during major wildfires total losses comprise most of the ultimate losses.
Speaker Change: Partial losses have a longer reporting tail and different dollar amounts depending on the type of claim.
Speaker Change: We look at partial claim reporting patterns on previous largest.
Speaker Change: Type to determine our ultimate loss on parcels.
Speaker Change: We believe there is strong video and other evidence that shows utility equipment caused the Eaton fire, we estimate the range of recovery to be in the 40% to 70% range.
Speaker Change: Subrogation that these levels make it less likely we will consider the palisades.
Speaker Change: And several previous wildfire events caused by utility company equipment, we sold our subrogation rights, but we have not determined whether we will do so with the Eaton fire.
Speaker Change: There is active interest in Pershing purchasing companies subrogation rights.
Speaker Change: With all that background, we will now open it up for questions.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question you May press Star then the number one on your Touchtone phone.
Speaker Change: If you are using a speaker phone please pick up your handset before pressing the keys.
Speaker Change: So enjoy your question. Please press Star then the number two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Yes.
Speaker Change: Rudy can you hear us.
Speaker Change: Speakers are you ready to take your questions.
Speaker Change: Yes.
Speaker Change: Okay. So your first question comes from the line of Gregory Peters from Raymond James. Please go ahead.
Gregory Peters: Good morning, everyone.
Speaker Change: Couple of questions for you first.
Gregory Peters: I know it's speculation but.
Gregory Peters: Do you have any indication on.
Gregory Peters: What.
Gregory Peters: The fair plan total loss, if I looked like I think they just.
Gregory Peters: You talked about the $1 billion that theyre going to SaaS, but.
Do you have any view on what the total fair plan, whilst might look like.
Greg: We do not hey, Greg we do not.
Gregory Peters: Okay.
Gregory Peters: Okay.
Gregory Peters: <unk>.
Gregory Peters: Okay well.
Gregory Peters: I think one of the.
Gregory Peters: The bigger question since popped up recently is just.
Gregory Peters: As you work your way through paying off these losses, you talked about stress to their capital.
Gregory Peters: Yes.
Gregory Peters: Could you talk about how.
How you view your premiums to capital ratio is there any wiggle room. If there is a deviation above the three to one.
Benchmark.
Gregory Peters: Considering the strength of your underlying results.
Gregory Peters: Give us some perspective on how your view on capital.
Gregory Peters: Okay.
Gregory Peters: We think that as a result of this event were going to be up in the high twos, three maybe low threes, depending on what we ended up booking.
Gregory Peters: But as I mentioned earlier, we consider this really a 2025.
Gregory Peters: Earnings event, right I think that with our strong core underlying earnings were going to build back.
Gregory Peters: Our surplus and drive down that premiums to surplus ratio.
Gregory Peters: So and we'll be watching our growth, but we want to what we want to grow our auto business.
Gregory Peters: We want to grow our homeowners business prudently.
Gregory Peters: And we think that.
Gregory Peters: That the premiums to surplus ratio as I mentioned earlier is going to it's going to be at in the high twos to low threes, but I think the surpluses that were going to earn through our core underlying earnings are going to are going to drive that ratio back down.
Gregory Peters: Okay.
Gregory Peters: I know you're still in the process of paying claims, but can you talk about.
Gregory Peters: How you think about the efforts to recover your.
Gregory Peters: Your reinsurance pricing in your homeowners rate going forward because it certainly seems like your reinsurance costs are going up and then on that on that point, maybe you could give us a view on how you think the reinsurance market might respond to your renewal.
Gregory Peters: Later this spring.
Gregory Peters: I'm going to have Jeff answer that.
Greg: Hi, Greg.
Gregory Peters: First and foremost.
Gregory Peters: To reiterate.
Gregory Peters: We recently received approval on a 12% increase on our homeowners book in California, and that will be effective.
Gregory Peters: Towards the end of next month March of this year, we are evaluating the.
Gregory Peters: The next step with where our rate needs to be.
Gregory Peters: Looking ahead to the.
Gregory Peters: The second quarter of this year as well.
Gregory Peters: When we would be.
Gregory Peters: Looking to take the next action with our right at that particular time as far as the second part of your question as far as the reinsurance renewal.
Gregory Peters: And continuous conversation with our reinsurance partners that is a normal part of the process. Our renewal is seven one of this year.
And we expect.
Gregory Peters: The reinsurance process too.
Gregory Peters: Go as expected.
Gregory Peters: Obviously this event will be factored in.
Gregory Peters: And we do expect our costs to go up at least moderately during this period and.
Gregory Peters: And we will share more as we have that information towards the seven one deadline.
Speaker Change: Makes sense I will I will add to that Greg that our expectation prior to the wildfires was for our reinsurance exposure adjusted reinsurance premium to be flat to down obviously this is going to change.
Speaker Change: And as Jeff mentioned, we'll know more as we go out.
Speaker Change: So we are expecting some kind of an increase but prior to the wildfires, we were expecting a reinsurance exposure adjusted rates to be flat to down.
Speaker Change: Great I guess the last question I will have for you is just.
Speaker Change: Can you talk about I mean getting back to your core underwriting business. The underlying results can you talk about just the frequency and severity trends in your auto.
Speaker Change: <unk>.
Speaker Change: And how it sets up for this year's expectations.
Speaker Change: Sure I'm going to.
Speaker Change: Let Jeff handle that as well.
Speaker Change: Greg I can answer that so our frequencies and auto are showing a small decline for property damage and collision and are close to flat for bodily injury.
Speaker Change: On the severity side, we are seeing low to mid single digits for property damage and collision and mid teens for bodily injury.
Speaker Change: Got it alright, well thank you for your answers.
Speaker Change: Thanks, Greg.
Your next question comes from the line of Guy Baron from Spring view. Please go ahead.
Guy Baron: Alright, Thank you for hosting the call. Thanks for taking my question.
Speaker Change: Okay.
Speaker Change: So in the fourth quarter you generated.
Speaker Change: Close to $3 of operating earnings share, which annualized is that to a very big number I guess.
Speaker Change: Thanks quarters, the lower cat.
Speaker Change: Quarter, so maybe its closer to $10.
Speaker Change: Annualized.
Speaker Change: Operating earnings.
Speaker Change: And so can you talk about to what extent this level of earnings power.
Speaker Change: Is it sustainable in your view, while giving consideration for.
Speaker Change: Future reinsurance costs to Greg to Greg's question.
Speaker Change: And your internal modeling for future cats and incorporating that.
Speaker Change: The rate increases that you've been.
Speaker Change: You referred to earlier on the homeowners side.
Speaker Change: Yes, it's a good question.
Speaker Change: We posted a 91% 91, 4% combined ratio.
Speaker Change: Quarter.
Speaker Change: We do expect over time over time to that move up closer to our target.
Speaker Change: Being closer to about 96.
Speaker Change: That I don't think thats going to happen overnight.
Speaker Change: We're going to continue to monitor our cost structure and in.
Speaker Change: Can make in our trends and make the necessary filings as needed but.
I think over time, you'll see the combined ratio would probably go up closer to our target.
Speaker Change: Do you believe that the California, DIY now understands the need to allow.
Speaker Change: Insurers too to take.
Speaker Change: Appropriate rate actions.
Speaker Change: Following the while I do.
Speaker Change: I do I mean, I think the commissioner is.
With a sustainable insurance strategy.
Speaker Change: It's kind of made that clear in his new I mean he is.
Speaker Change: Promulgated some regulations.
Speaker Change: Can allow us to include reinsurance.
Speaker Change: And in the cost and also allowing models. So I do believe that the department of insurance is recognize that.
Speaker Change:
Speaker Change: Bye bye the actions.
Speaker Change: Got it Okay, and just lastly, a quick one on the subrogation when you sold your.
Speaker Change: 2018 subrogation rights.
Speaker Change: It was like $10 million that you received.
Speaker Change: Can you tell us what were the proceeds relative to your initial estimate of what the subrogation recovery.
Speaker Change: Ultimately has been or what it actually ended up being.
Speaker Change: Okay.
Speaker Change: Ed.
Ed: Yes, I'll take that Guy and just to give you a little bit more context.
Ed: There's been something like 15.
Ed: Since 2017, there's been something like 15 utility caused wildfires.
Ed: Where theres been recoveries by insurance companies, including Mercury on.
Ed: I'll go through them real quick actually in 2017, there was the North Bay Creek and promise in 2018, the camp and Woolsey 2019, Getty easy Kincaid Maria Tonight today.
Ed: 2020, Bobcat Zaugg Pine Haven, Silverado, 2021, Dixie 2022, coastal and fair view.
Ed: And.
Ed: The recoveries on those events range from around 55% to 70%.
Ed: So.
Ed: Theres a well.
Ed: Established track record of.
Ed: Utilities paying out substantial recovery.
Ed: On previous wildfires.
Ed: We do have a very active interest in mercury selling our subrogation rights, obviously, if you sell them the mouth, some something less than what the ultimate recovery would be and we are evaluating that.
Ed: At this point in time.
Ed: Yes, there is very strong evidence that the heat and fire was caused by utility company and equipment. Other video of the lines arcing and the fire starting at the bottom of the transit transmission tower.
Ed: And we're going to aggressively pursue subrogation.
Ed: Especially for the Eaton event.
Ed: Okay.
Ed: Yes.
Ed: Thank you good luck in <unk>.
Ed: Be well.
Ed: Thank you. Thank you.
Ed: Okay.
Speaker Change: Your next question comes from the line of choline in Abu manner from.
Speaker Change: Car need capital your line is now open.
Speaker Change: Hi, Good morning. Thanks for taking my question can you give us a little bit more background about on the claims themselves. How many claims have you received how many of them are total losses and.
Speaker Change: Can you expand on the $800 million has been paid through Friday.
Speaker Change: How much of what percent of those claims was actually paid in.
Speaker Change: Whether it's coverage AC and D. I know you mentioned, some some numbers earlier, but expanding on what percent of the total kind of ACD coverage has been paid in.
Speaker Change: More color on the claims numbers would be really helpful.
Victor: Hi, This is Victor I'll take that question. So to date, we have about 2700 claims.
Speaker Change: Have been reported to Mercury, Okay of those claims and Thats for both events.
Speaker Change: Of those claims we have about 650 homeowners policies that are totaled.
Speaker Change: And we have about another 150 totals that's spread out between landlord policies.
Speaker Change: Renters condos in commercial property.
Speaker Change: What we've done on most of them more than 95% of them at this point is paid the coverage.
Speaker Change: And that obviously makes up a very large share of the ultimate.
Speaker Change: Beyond that we advance our portion of the contents coverage.
Speaker Change: We also have advanced.
Speaker Change: Ali as we've worked with insurers our customers to make sure that they have temporary housing is needed.
Speaker Change: Understood.
Speaker Change: Pretty impressive how much has been distributed relative to the total damages relative.
Like the fair plan and some of the other.
Speaker Change: Here's that have reported.
Speaker Change: Good on you guys for distributing that my my second question is around like the $1 62 billion estimate.
Speaker Change: Can you I think.
Speaker Change: The information provided in the press release and the 10-K.
Speaker Change: Ambiguous as to what methodology you got.
Speaker Change: LG you used to get to those.
Speaker Change: <unk>.
Speaker Change: So can you kind of just explain.
Speaker Change: How I would like is there a bottoms up number that you have based on what you know our total losses today and what you what evidence you have on thinking about the boxes on AC D and then potentially like.
Speaker Change: On the other kind of claims that could come associated with those policies.
Speaker Change: You also the line was cutting out earlier, you mentioned something about the reinstatement of reinsurance is that included $80 million to $100 million and the gross estimate of $1 62 or is that additional.
Speaker Change: Yes. This is Terry I'll take I'll take that call. So.
Speaker Change: That question.
Speaker Change: So when we're doing our estimates of ultimate.
Victor: As Victor mentioned, we know that the number of total losses, and we apologize in some of our prepared script was cutting out.
Victor: And so we've identified all the totals we've done that through claims are being reported by the policyholders on ground inspections and aerial imagery. So we have a pretty good handle on all of the total.
Victor: We know what the total insured value is for each one of the total losses. So you have the dwelling limits. The additional replacement cost the contents limit debris removal additional structures plant in landscaping additional living expenses to name most of them.
Victor: And so that makes up your total insured value.
Victor: He then.
Victor: Radius.
Victor: Ager wildfire than sector, and campfire, where we had about 200 totals on that.
Victor: Buyer.
Victor: The and we know what percentage of the Tid actually ultimately paid out on those events and it's a relatively tight range is a pretty high number as you can imagine so we can just take the tid.
Victor: The total that we know today.
Victor: Why.
Victor: Those percentages from previous very large wildfire events on total and that gives us the only reasonable estimate of what the.
Victor: Ultimate loss will be on the totals.
All of the parcels.
Victor: Those come in over time, Theres smoke damage there.
Victor: Evacuation theirs harsher.
Victor: Partial structure like fences or detached garage is.
Victor: A little bit longer reporting pattern.
Victor: So we know what's been reported today, we know typically the tail on the reporting pattern based on other very large events and we have an idea of what the.
Victor: Average severities on the based on.
Victor: Other historical information and current information and so we kind of look at all of that to determine what the parcel.
Victor: Losses will be.
Victor: Just to point out.
Victor: The dollars from the total losses are by far the largest component of the ultimate loss for the company.
Victor: So that's how we do how we can come up with our one six to two Plano.
Victor: <unk> on the gross.
Speaker Change: What was the next forgot the other question Stephens Inc.
Speaker Change: That included the reinstatement premium is not included in those numbers that's correct, so you'd have to add that.
Speaker Change: 80 to 101.
Speaker Change: The only man, it's going to be charged.
Speaker Change: Even the over the first and second quarter of 'twenty five.
Speaker Change: Understood makes sense and then one more question if you don't mind.
Speaker Change: The reinsurance policies I know those are not public.
Speaker Change: You guys have provided some color as to how.
Speaker Change: One would think about Dev one event versus two events question, but.
Speaker Change: Can you kind of expand whether you've had discussions with your reinsurers about.
Speaker Change: Potential for classifying two events, if need be and update pushed back what sort of dialogue with the reinsurers have you had around.
Speaker Change: The potential for needing a second advance on whether they are onboard with that or not.
Speaker Change: Yeah, well, we've had discussions with our reinsurance broker and they've had discussions with our reinsurers.
Speaker Change: And we're really not seeing any pushback.
Speaker Change: We think that the contract is pretty clear.
Speaker Change: I was I will say this I think with our subrogation potential I think the likelihood of US classifying this as two events is less likely but it's an option and.
Speaker Change: I believe that will probably make a decision on that relatively soon.
Speaker Change: Understood. Thank you.
Speaker Change: Got it.
Speaker Change: Yes.
Speaker Change: Your next question.
Speaker Change: Your line of credit.
Speaker Change: Sorry, Sir your next question comes from the line of Prem <unk> from <unk> Advisors. Please go ahead.
Prem: Hi, all thank you for taking the question.
Speaker Change: I guess just to start with in your reinsurance Treaty language does it specifically differ to Tcs.
Prem: As far as being able to make a single ore.
Speaker Change: Multiple of <unk>.
Speaker Change: Or is it purely a fine by Ars and distance.
Speaker Change: It defines tcs, yes, it does.
Speaker Change: It differs upcs.
Speaker Change: It differs tcs it does.
Speaker Change: Okay, and then around the subrogation piece.
Speaker Change: And help me understand that a lot.
Speaker Change: Little bit better.
Speaker Change:
Speaker Change: Do you.
Speaker Change: <unk> claims that are being made that youll eventually recover through subrogation agreements like that cash is out the door now right and then you're going to go into litigation or in some sort of.
Speaker Change: Some sort of process to recover that through subrogation is that correct.
Speaker Change: That's correct.
Speaker Change: Okay.
Speaker Change: And then I guess my last question would be it.
Speaker Change: It seems like a lot of your peers have had a pretty strong view around fair claim damages.
Speaker Change: There's been stuff in the press.
Speaker Change: And have had a pretty tight.
Speaker Change: Estimated <unk> losses.
Speaker Change: Can you give us a little bit more insight as to why you guys don't have that type of a view or are not saying that at the moment.
Speaker Change: On that last question.
Speaker Change: Well I mean from a from a gross loss.
Speaker Change: Standpoint, as Ted pointed out we're taking a look at various previous wildfires.
Speaker Change: And establishing a range and what are the things that we wanted to do is is.
Speaker Change: Hotel our investment community is that we think that $1 6 billion is on the low end, we think that $2 billion on the high end and probably a number is going to be somewhere in between that.
Speaker Change: And it's based on various assumptions.
Speaker Change: It's based on our assumptions for gross losses, it's based on the assumption for various subrogation recoveries. So we provided a range because of that.
Speaker Change: Thank you that range go higher as partial claims come in.
Speaker Change: I mean, I think anything is possible but.
Speaker Change: The purpose of the range that we gave out the range. The purpose of that range was for us to give you an idea of what we thought the low end of the range was in the high end.
Speaker Change: Is it possible it could be above 2 billion I guess it is possible, but we feel that what we've done with providing a range is provide you with with the high end of the range being 2 billion and the low end being 1.6, and most likely something in between.
And but that's ex fir right and so far as sort of the wildcard out here I know <unk> got $1 billion of assessments that they put out.
Speaker Change: As of yesterday, but I mean, there are numbers out there that things are.
Speaker Change: Up in the 15% to $20 billion range.
Speaker Change: Well.
Speaker Change: So like how do you guys think about how to communicate that that's really well.
Speaker Change: Yes, I mean for the fair plan keep in mind that we can recoup after the first billion dollars for personal lines.
Speaker Change: Of assessments, we can recoup 50 on a dollar anything above $1 billion, we can recoup 100%.
Speaker Change: Right.
Speaker Change: And the calendar year.
Speaker Change: And you Ain't, but youre able to but that cash goes out the door to fair or whoever and you're going to have to charge your clients more over that period.
Speaker Change: But we're talking about the immediate need for capital.
Yes, and we don't have any liquidity issues.
Speaker Change: Alright fair enough. Thank you.
Speaker Change: This is not a liquidity issue.
Speaker Change: Yes, I would just add that that are <unk>.
Speaker Change: <unk> our reinsurance treaties.
Speaker Change: Allow for the inclusion of Aeroplan losses.
Speaker Change: To the extent that we have.
Speaker Change: I've seen some of these worst case scenario fair plans, which by the way probably don't take into consideration that the fair plan has their own reinsurance.
Speaker Change: But.
Speaker Change: Worst case scenarios or we can attach to the fair plan losses to our reinsurance treaty.
Speaker Change: Which we've done actually in previous.
Speaker Change: Mass of wildfires.
Speaker Change: And on top of that with these assessments.
Speaker Change: We're able to surcharge our policies policyholders to recoup those assessments.
Speaker Change: So part of the reasons why we bifurcated the Merck.
Speaker Change: <unk> losses from the fair plan losses.
Speaker Change: It is because.
Speaker Change: We think that thats separate and it's something that.
Speaker Change: <unk> is not going to be as significant to the company because of the ability to recoup it under our reinsurance and recoup fair plan assessments.
Speaker Change: And then so then what portion of that airplane loss do you think is palisades versus out that email.
Speaker Change: We don't know, we don't know that but likely.
Speaker Change: Their plan is more palisades is likely but we don't know.
Speaker Change: Got it cool thank you.
Speaker Change: Just to add to that.
Victor: Yes. This is Victor I do want to add something because you threw out some numbers earlier around a range of 15 to 20 billion and although not all information on the fair plans exposures as public I think that came out yesterday, saying that their exposure is about $4 billion. So I do want to kind of clear that up.
Victor: If you read everything they're saying it's clear in their statements.
Victor: And I would say that's exposure not necessarily losses correct yeah. So.
Victor: Potential.
Victor: Before reinsurance you're next.
Speaker Change: Your next question comes from that line of Ian Hallen Private Investor. Please go ahead.
Speaker Change: Hey, I was wanted to ask so you all say you have 800 structures that are total loss correct and the numbers. There are 650, Hs three and in 150 landlord and condo correct.
Speaker Change: Correct no no.
Speaker Change: No.
Speaker Change: <unk>. The 150 figure includes ventures, as well, which is obviously significantly lower yes did you hear that.
Speaker Change: Yes, yes, I heard that you are cutting out a little bit earlier. So if you know that what's the total insured losses for that segment of your book.
Speaker Change: Hello.
Speaker Change: What do you mean by total insured losses, you mean total insured value do you mean, the total value that's exposed yes.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: Yes, as we mentioned earlier.
Speaker Change: We're not reporting that figure.
Speaker Change: I'd say that.
Speaker Change: Our estimated the ultimates for total losses.
Speaker Change: Is based on the Ti V and the percentage.
Speaker Change: Ah.
Speaker Change: The percentages are almost the entirety of the.
Speaker Change: Tid.
Speaker Change: That's where our estimates come from.
Speaker Change: But as you know that the structures or damage.
Speaker Change: Youre going to pay out these people most likely at the high end of the damaged value correct.
Speaker Change: That's true.
Speaker Change: So why don't you report that number on your press release.
Speaker Change: Zach this is pretty quite simple.
Speaker Change: We're estimating pretax loss gross loss of $1 62 billion.
Speaker Change: Shared how we went through the process of estimating that that loss, we're taking total insured value for total losses.
Speaker Change: Taking a look at historic other wildfires and applying a range of percentages based on historic.
Speaker Change: And then we're adding.
Ted: Our process for partials and others as Ted mentioned, we have some autos in there as well.
Ted: And we come up with a range of $1 62 billion and that's what we did.
Speaker Change: But why are you using the historic values. If you know the number of properties that you ensure that had been destroyed I mean early in the call you were talking about people on site and satellite data.
Speaker Change: Hawaii Oracle number that historic values are percentages of what you end up paying of total insured value.
Speaker Change: So it can be it can range from anywhere from 80% to 90% of your total insured value as an example that you ultimately pay out.
Speaker Change: So we're using a range of what we ultimately pay out of total insured value.
Speaker Change: <unk> to.
Speaker Change: To come up with a gross lowlands and high end.
Speaker Change: So of the total structures destroyed what im hearing is that you don't actually know the insured value of the structures that have been destroyed.
Speaker Change: No youre not.
Speaker Change: This is not complicated.
Speaker Change: We have total insured values.
Speaker Change: We have total insured values.
Speaker Change: Know what that number is.
Speaker Change: We have a range of what we estimate we think we're going to pay of that total insured value based on previous wildfires that simple.
Speaker Change: Let's move on are you basing it on previous wildfires.
Speaker Change: Alright.
Speaker Change: Yes.
Speaker Change: For example on the campfire are the North Bay fire.
Speaker Change: We know that we've paid out 80% to 90%.
Speaker Change: Of the total insured value on each total loss.
Speaker Change: That was our ultimate loss. So if we had $1 million total insured value the ultimate loss, let's say 90% of that on average.
Speaker Change: Our ultimate loss was $900000 in that example.
Speaker Change: So that 90% we apply to the total insured values on the current event on the Eaton and Palisades fire and Thats, how we get the number.
Speaker Change: We're going to move on to the question.
Speaker Change: Yeah, I mean, just.
Speaker Change: Your last question comes from the line of Dan David from Wolfe Research. Please go ahead.
Dan David: Hi, gentlemen, thank you for taking my question.
<unk>.
Dan David: I've, obviously been concerned about.
Speaker Change: It's been going on with these wildfires and your company.
Dan David: Some of the things that.
Dan David: That really Perplexes me is why are you reporting far less.
Dan David: And average than your peers less than 50% in many cases.
Dan David: If you really look at it and what's been disclosed.
Dan David: How is it the average of what average of what.
Dan David: Policies in force I mean, you have you have how many policies enforced right 929.
Dan David: And Youre, averaging 1300 70 versus farmers 40 545.
Dan David: One third the Pis and Palisades.
Dan David: No I don't I don't neurology libraries pretty snug.
Speaker Change: Look I know you are up there in your industry.
Speaker Change: No I don't know I know you have said because you've shorted our stock.
Speaker Change: <unk>.
Speaker Change: Im not upset.
Speaker Change: I'm doing fine Okay, you got.
Speaker Change: Alright, so not drip it out here three months four months later.
Speaker Change: As youre collecting higher premiums, let's just have an honest conversation here really let's just have an honest conversation how are you.
Speaker Change: Are you the best in class there I mean.
Speaker Change: Youre doing historical numbers right, so youre not boots on the ground.
Speaker Change: Did the fires just burn around your properties, I mean, and and not Allstate travelers are farmers.
Speaker Change: I haven't.
Speaker Change: The total debt as far as total losses, we know that number exactly a pretty cool I don't know what youre talking about are you, saying that were hiding the number of total losses.
Speaker Change: Is that what youre, saying youre under estimating I mean, certainly with the reinsurance.
Speaker Change: I mean with the subrogation are you minus thing that out already or you. Just like are you just like saying youre going to win in court for subrogation and your minus thing that out right now because you've got to pay that the whole time right.
Speaker Change: We've gone through what the subrogation.
Speaker Change: That looks like we've talked about the potential go through it again, okay. Okay.
Speaker Change: I've done it already so.
Speaker Change: No look.
Speaker Change: If youre not including the Eaton fire in your in your $2 billion number.
Speaker Change: Then the whole thing is total bullshit right because you've got to talking about it's not included in the 2 billion.
Speaker Change: You're saying you're minus again.
Speaker Change: Sure.
Speaker Change: Let's end this call.
Speaker Change: Anything else subrogation.
Speaker Change: Do you think this is my answer to question and answer session.
Gabriel: I would now like to turn the conference back to Gabriel to your door for any closing remarks, Sir. Please go ahead.
Speaker Change: Well. Thank you very much for joining us today that was interesting.
Speaker Change: Anyway. Thank you for joining us today and we'll talk soon thank you.
Speaker Change: This concludes today's conference call. Thank you for attending today's presentation you may now disconnect.
Speaker Change: [noise].