Mercury General Corporation (NYSE:MCY) Q4 2024 Earnings Call Transcript

Mercury General Corporation (NYSE:MCY) Q4 2024 Earnings Call Transcript February 12, 2025

Operator: Good morning, and welcome to the Mercury General Corporation’s fourth quarter 2024 conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by the number zero. After today’s 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 Corporation’s future operating results and financial position. Such statements involve risks and uncertainties that cannot be predicted or quantified and which may cause future activities and results of operations to differ materially from those discussed today. I would now like to turn the conference over to Gabriel Tirador, CEO. Please go ahead.

Gabriel Tirador: Thank you very much. I would like to welcome everyone to Mercury General Corporation’s fourth quarter conference call. I’m Gabriel Tirador, Chief Executive Officer. In the room with me is Victor Joseph, President and Chief Operating Officer; Ted Stalick, Senior Vice President and CFO; Chris Graves, Vice President and Chief Investment Officer. Before we begin, I want to say that our thoughts are with all those affected by the recent catastrophic wildfires in Southern California. The wildfires have had a devastating impact on communities and individuals. Several of our executives, including many of those on the call, recently toured Altadena. It is heartbreaking to see so many people impacted by this disaster.

In times like these, our role as insurance professionals becomes even more critical. Our primary mission is to provide support and assistance to our insureds when they need it most. I am so proud of our customer-facing team members’ unwavering commitment to helping our fellow Californians who have entrusted us with their protection. Turning to our fourth quarter and full-year results, 2024 was a year for the record books. We are very pleased to report that our fourth quarter after-tax operating income of $98 million was the highest in the company’s history. The 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%.

Ted Stalick: Catastrophe losses in the quarter were $41 million and added 3 points to the combined ratio for the full year 2024, which added 5.5 points to the full-year 2024 combined ratio. Excluding catastrophe losses, the combined ratio was 88.3% in the quarter and 90.5% for the full year. Investment income after tax was $61.5 million in the fourth quarter of 2024, an increase of 15% and 18% over the prior year quarter and year, respectively. Driving the increase in investment income was an increase in average investment balances of 16% in the quarter and 12% for the full year 2024. Premium growth coupled with strong investment and underwriting income led to net premiums written growing 16% to $1.3 billion in the quarter and 20.5% to $5.4 billion for the full year 2024.

The increase in net premiums written was primarily due to higher average premiums per policy for rate increases. Our strong operating results helped fuel our growth in company history. 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-wide earned premium, posted favorable results in the fourth quarter and full year 2024. For the full year 2024, our personal auto business posted a core underlying combined ratio of 92.1%, and our homeowners business posted a core underlying combined ratio of 76.1%. In addition, we expect 2025 investment income to be near 2024 levels. Core underlying earnings are expected to provide capital generation in 2025, which will help build back the capital lost from the wildfires.

We estimate our gross catastrophe losses from the January wildfires before our share of fair plan losses to be in the range of $1.6 billion. This estimate is based on total insured values, payout ratios, and other data from previous large wildfire events. Pretax net catastrophe losses are estimated to be $155 million to $325 million. The range of net catastrophe losses was determined based on various assumptions for gross losses and levels of reinsurance utilization. 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. On an after-tax basis, we estimate the net impact of wildfires to statutory surplus in the first quarter to be $5 million to $295 million.

However, as previously mentioned, we expect our core underlying earnings to partially offset the impact of the catastrophe losses from the wildfires. Yesterday, the California Department of Insurance approved the fair plan’s request for a one company’s participation rate in the fair plan is approximately 5%. Accordingly, we expect about a $50 million assessment from their fair plan. Fifty percent of this assessment is recoupable via a temporary supplemental fee to policyholders. Fair plan losses can be added to reinsurance.

Chris Graves: Thanks, Gabe. So moving on to the next slide. Talking about reinsurance. The company’s catastrophe reinsurance program provides $1.29 billion of limits on a per occurrence basis after covered catastrophe losses exceed the company’s retention. The company also has up to $20 million of coverage on a property excess of loss reinsurance treaty available to offset losses exceeding $5 million per property that attaches prior to the catastrophe limits. The company expects to use approximately $10 million to $20 million of those limits for wildfire claims. One percent of the reinsurance limit of the $650 million in excess of a $650 million coverage layer was placed as parametric coverage that pays out based on industry insured values and predetermined grids within the fire footprint and the company’s participation percentage within that grid.

Not be eligible for recovery and as such, $6.5 million of the $1.29 billion of total limits does not qualify for the Eden or Palisades fire. The company’s catastrophic reinsurance treaty allows for the combining of events that occur within a 150-mile radius as a single occurrence if each individual event is classified as its own catastrophic event by the property claims service, a unit or PCS, a unit of the insurance services office. Each event can be considered a separate occurrence. In the case of the Palisades and Eaton wildfires, the PCS has designated each as a separate event. Fires 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.

In addition, catastrophe losses from the California fair plan are covered by reinsurance up to the limits provided. We have paid $800 million out to our insured primarily for 100% of coverage a dwelling limits advances up to $250,000 on contents, and advances for additional living expenses. We have billed $1 billion to our reinsurers and have received back, actually, as of this morning, $531 million to date. We have over $1 billion cash on hand, and the cash is currently earning 4.35%. In large cat events, typically, two-thirds of the dollars are paid year mark 80% of the dollars are paid out. We are now past the largest part of the surge in demands for cash from this event. For our estimated ultimate losses, we have identified the total losses from claims being reported by policyholders on ground inspections, and insured value for each total loss, which includes dwelling limits, additional replacement costs, contents, debris removal, additional structures, plants and landscaping, and additional living expenses.

We take the total insured values and apply payout percentages from other significant wildfire events such as the to estimate the ultimate loss on all of our total losses. Typically, during major wildfires, total losses comprise most of the ultimate losses. Partial losses have a longer reporting tail and differing dollar amounts depending on the type of claim. Look at partial claim reporting patterns on previous large type to determine our ultimate loss on partials. 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. Subrogation at these levels make it less likely we will consider the Policy In 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 Eden fire.

There is active interest in purchasing the company’s subrogation rights. With all that background, we will now open it up for questions.

Operator: We will now begin the question and answer session. To ask a question, you may press star then the number one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then the number two. At this time, we will pause momentarily to assemble our roster.

Gabriel Tirador: I mean, I’m ready.

Operator: Can you hear us? Speakers, are you ready to take your questions?

Gabriel Tirador: Yes.

Q&A Session

Operator: Okay. So your first question comes from the line of Greg Peters from Raymond James. Please go ahead.

Greg Peters: Morning, everyone. Couple questions for you. First, I know it’s speculation, but do you have any indication on what the fair plan total loss might look like? I think they just, you know, you talked about the $1 billion that they’re going to assess but do you have any view on what the total fair plan loss might look like?

Gabriel Tirador: Oh, we do not. Hi, Greg. We do not.

Greg Peters: Okay. Well, I think one of the bigger questions since popped up recently. It’s just, you know, as you work your way through paying off these losses, you talked about stress in your capital. Can you talk about how you view your premiums to capital ratio? Is there any wiggle room if there’s a deviation above the three to one benchmark, you know, considering the strength of your underlying results? Just give us some perspective on how you’re viewing capital.

Gabriel Tirador: We think that as a result of this event, we’re gonna be, you know, up in the high twos, three, maybe low threes, you know, depending on what we end up booking. But as I mentioned earlier, you know, we consider this really a 2025 earnings event. Right? I think that with our strong core underlying earnings, we’re gonna build back our surplus and drive down that premium to surplus ratio. So and we’ll be watching our growth, but, you know, we want to grow our auto business. We want to grow our homeowners business prudently. And we think that the previous surplus ratio, as I mentioned earlier, is gonna be at in the high twos to low threes, but I think the surplus we’re gonna earn through our core underlying earnings are gonna drive that ratio back down.

Greg Peters: Okay. And, I know you’re still in the process of paying claims, but can you talk about how you think about the efforts to recover your reinsurance pricing in your homeowners rate going forward because it certainly seems like your reinsurance costs are going up. And then on that point, maybe you could give us a view on how you think the reinsurance market might respond to your renewal later this spring.

Gabriel Tirador: I’m gonna have Jeff answer that.

Jeff Schroeder: Hi, Greg. First and foremost, I want to reiterate that we recently received approval on a 12% increase on our homeowner’s book in California, and that will be effective towards the end of next month, March of this year. We are evaluating the next steps with where our rate needs to be. Looking ahead to, you know, the second quarter of this year as when we would be looking to take the next action with our rate at that particular time. As far as the second part of your question, as far as the reinsurance renewal, we are in continuous conversation with our reinsurance partners. That is a normal part of the process. Our renewal is July 1 of this year. And we expect, you know, the reinsurance process to, you know, go as expected. You know, obviously, this event will be factored in, and we do expect costs to go up at least moderately during this period. And we will share more as we have that information.

Greg Peters: Makes sense. 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 gonna change, and as Jeff mentioned, we’ll know more as we go out. So we are expecting some kind of an increase, but, you know, prior to the wildfires, our reinsurance exposure adjusted rates were expected to be flat to down.

Greg Peters: Great. I guess the last question I’ll have for you is just 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 and how it sets up for this year’s expectations?

Gabriel Tirador: Sure. I’m gonna let Jeff handle that as well.

Jeff Schroeder: Hey, Greg. I can answer that. So our frequencies in auto are showing a small decline for property damage and collision and are close to flat for bodily injury. On the severity side, we’re seeing low to mid-single digits for property damage and collision and mid-teens for bodily injury.

Greg Peters: Got it. Alright. Well, thank you for your answers.

Gabriel Tirador: Thanks, Greg. Your next question comes from the line of Guy Baron from Spring View. Please go ahead.

Guy Baron: Hi. Thank you for hosting this call and for taking my question. So in the fourth quarter, you generated close to $3 of operating earnings per share, which annualizes to a very big number. I guess the fourth quarter is a lower cat loss quarter, so maybe it’s closer to $10 annualized of operating earnings. And so can you talk about to what extent this level of earnings power is sustainable in your view, you know, while giving consideration for future insurance costs to Greg’s question and your internal modeling for future tax and incorporating that, you know, the rate increases that you referred to earlier on the homeowner side?

Gabriel Tirador: It’s a good question. We posted a 91.4% combined ratio in the quarter. We do expect over time, over time, for that to move up closer to our target. Target being closer to about a 96. That I don’t think that’s gonna happen overnight. You know, we’re gonna continue to monitor our cost structure and make and our trends and make the necessary filings as needed. But I think over time, you’ll see the combined ratio probably go up closer to our target.

Guy Baron: Do you believe that the California DOI now understands the need to allow insurers to take appropriate rate actions following the wildfires?

Gabriel Tirador: I do. I do. I mean, I think the commissioner, with his sustainable insurance strategy, has kinda made that clear in his view. I mean, he’s promulgated some regulations that were gonna allow us to include reinsurance in the cost and also allowing models. So I do believe that the Department of Insurance has recognized that by the actions.

Guy Baron: Got it. Okay. And just lastly, a quick one on the subrogation. When you sold your 2018 subrogation rights, I think it was, like, $10 million that you received. Can you tell us what were the proceeds relative to your initial estimate of what the subrogation recovery would ultimately have been or what it actually ended up being?

Ted Stalick: I’ll take that, Guy. Yeah, I’ll take that, Guy. And just to give you a little bit more context, there’s been something like fifteen since 2017. There’s been something like fifteen utility-caused wildfires where there’s been recoveries by the insurance companies, including Mercury. I gotta go through them real quick. Actually, in 2007, there was the North Bay Creek and Thomas. In 2018, the Camp in Wolseley. 2019 Getty Easy Kinkade Maria Tanae. 2020 Bobcat Zog Pine Haven Silverado 2021 Dixie, 2022 Coastal in Fairview. And the recoveries on those events range from around 55% to 70%. So there’s a well-established track record of utilities paying out substantial recoveries on previous wildfires. We do have a very active interest in Mercury selling our subrogation rights.

Obviously, if you sell them, the amount is something less than what the ultimate recovery would be, and we are evaluating that at this point in time. Yeah, there’s very strong evidence that the Eaton fire was caused by utility company equipment. There’s video of the lines arcing and the fire starting to the bottom of the transmission tower. And we’re gonna aggressively pursue subrogation, especially for the Eden event.

Guy Baron: Okay. Well, thank you. Good luck. And yeah, be well.

Gabriel Tirador: Thank you. Thank you.

Operator: Your next question comes from the line of Kahlil Abumani from Coronade Capital. Your line is now open.

Kahlil Abumani: Hi. Good morning. Thanks for taking my question. Can you give us a little bit more background about the claims themselves? How many claims have you received? How many of them are total losses? Can you expand on the $800 million that has been paid through Friday? How much, what percent of those claims was actually paid and whether it’s coverage A, C, and D? I know you mentioned some numbers earlier, but expanding on the percent of the total kind of ACD coverage has been paid and more color on the claims numbers would be really helpful.

Victor Joseph: Hi. Yeah. This is Victor. I’ll take that question. So to date, we have about 2,700 claims that have been reported to Mercury. Of those claims, that’s for both events. Of those claims, we have about 650 homeowners policies that are totaled. And we have about another 150 totals that’s spread out between landlord policies, renters, condos, and commercial property. What we’ve done on most of them, more than 95% of them, is paid to coverage A. And that obviously makes it a very large share of the ultimate. Beyond that, we advance a portion of the content coverage. We also have advanced ALE as we’ve worked with insureds, our customers, to make sure that they have temporary housing as needed.

Kahlil Abumani: Understood. It’s pretty impressive how much has been distributed relative to the total damages relative and when compared to, like, the fair plan and some of the other peers I have reported. Are good on you guys for distributing that. My second question is around, like, the $1.6 to $2 billion estimate. Can you, I think that the information provided in the press release and the 10-K is all ambiguous as to what methodology you or what methodologies do you use to get to those figures. So can you kind of just explain how, like, is there a bottoms-up number that you have based on what you know are total losses today and what you’ve, what evidence you have on thinking about the maxes on A, C, D, and then potentially, like, and other kind of claims that could come associated with those policies.

And then you also, the line was cutting out earlier. You mentioned something on our reinsurance. Is that included, the $80 to $101 million in the gross estimate of $1.6 to $2 billion, or is that additional?

Ted Stalick: Yeah. This is Ted. I’ll take that question. So when we’re doing our estimates of ultimates, as Victor mentioned, we know the number of total losses, and we apologize if some of our prepared script was cutting out. And so we’ve identified all the totals. We’ve done that through claims being reported by the policyholders on ground inspections and aerial imagery. So we have a pretty good handle on all the totals. We know what the total insured value is for each one of the total losses. So you have the dwelling limits, additional replacement cost, the contents limits, debris removal, additional structures, plants and landscaping, additional living expenses to name most of them. And so that makes up your total insured value.

You then have previous major wildfire events such as the Camp Fire, where we had about 200 total on that. The bulk bay fire will be. And we know what percentage of the TIV we actually ultimately paid out on those events. And it’s a relatively tight range, and it’s a pretty high number as you can imagine. So we can just take the TIV from the totals that we know stay apply those percentages from previous very large wildfire events on total. And that gives us a pretty reasonable estimate of what the ultimate loss will be on the totals. While the partials, those come in over time. There’s smoke damage. There’s evacuation. There’s partial structures like fences or detached garages. A little bit longer reporting pattern on those. So we know what’s been reported to date.

We know typically the tail on the reporting pattern. Based on other very large events and we have an idea of what the average severities are on those based on other historical information and current information. And so we kinda look at all of that to determine what the partial losses. It’ll be just to point out that the dollars from the total losses are by far the largest component of the ultimate loss for the company. So that’s how we do how we kinda come up with our $1.6 to $2 billion range on the gross. What was the next I forgot the other question.

Gabriel Tirador: It is not included. The reinstatement plan is not included in those numbers.

Ted Stalick: That’s correct. So you’d have to add that $80 to $101 million. And that’s gonna be charged evenly over the first and second quarter of 2025.

Kahlil Abumani: Understood. Makes sense. And then one more question, if you don’t mind. On the reinsurance policies, I know those are not public and you guys have provided some color as to how one would think about the one event versus two events question, but can you kind of expand whether you’ve had discussions with your reinsurers about the potential for classifying two events if need be and have they pushed back? What sort of dialogue with the reinsurers have you had around the potential for needing a second event and whether they’re on board with that or not?

Gabriel Tirador: Yeah. Well, we’ve had discussions with our reinsurance broker, and they’ve had discussions with our reinsurers. And we’re really not receiving any pushback. We think that the contract is pretty clear. 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 I believe that we’ll probably make a decision on that relatively soon.

Kahlil Abumani: Understood. Thank you.

Gabriel Tirador: Yes.

Operator: Your next question comes from the line of Prem Nainani from Plomado Advisors. Please go ahead.

Prem Nainani: Hi, all. Thank you for taking the question. I guess just to start with, in your reinsurance treaty language, does this specifically defer to PCS as far as being able to make a single or multiple event claim?

Gabriel Tirador: Yeah. It defines PCS. Yes. It does.

Prem Nainani: It differs to PCS.

Gabriel Tirador: It differs to PCS. It does.

Prem Nainani: Okay. And then around this subrogation piece, and it helped me understand this a little bit better. Do you those claims that are being made that you’ll eventually recover through subrogation agreements, like, that cash is out the door, right? And then you’re gonna go into litigation or in some sort of process to recover that through subrogation. Is that correct?

Gabriel Tirador: That’s correct. Yeah.

Prem Nainani: Okay. And then I guess my last question would be it seems like a lot of your peers have had a pretty strong view around fair claim damages. There’s been stuff in the press. And have had a pretty tight estimate of their losses. Can you give us a little bit more insight as to why you guys don’t have that type of a view or not saying that at the moment? That’s my last question.

Gabriel Tirador: Well, I mean, from a gross loss standpoint, as Ted pointed out, you know, we’re taking a look at various previous wildfires and establishing a range. And one of the things that we wanted to do is, you know, tell our investment communities, look. We think that $1.6 billion is on the low end. We think that $2 billion is on the high end. And probably a number is gonna be somewhere in between that. And, you know, it’s based on various assumptions. You know, it’s based on the assumptions for gross losses. It’s based on the assumption for various subrogation recoveries. So, you know, we provided a range because of that.

Prem Nainani: And could that range go higher as partial claims come in?

Gabriel Tirador: I mean, I think anything is possible, but 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 and the high end. Is it possible it could be above $2 billion? I guess it is possible.

Prem Nainani: Right. And but that’s ex-fare. Right? And so fare is sort of the wild card out here. I know they’ve got $1 billion of assessments that they put out. As of yesterday, but, I mean, are numbers out there that things are, you know, up in the $15 to $20 billion range of what this is the same for Uber. So, like, how do you how do you guys think about how to communicate that? Because that’s really well,

Gabriel Tirador: Yeah. I mean, for the fair plan, keep in mind that we can recoup up to the first billion dollars for personal lines of assessments, we can recoup fifty cents on a dollar. Anything above a billion we can recoup a hundred percent.

Prem Nainani: Right. But that’s not and and and and and in the calendar year?

Gabriel Tirador: Right. And you’re a but you’re able to but that cash goes out the door to fair or whoever, and you’re gonna have to charge your clients more over that period. Right? So it’s we’re talking about the immediate need for capital.

Gabriel Tirador: Yeah. And we don’t have any liquidity issues.

Prem Nainani: Alright. Fair enough. Thank you. This is not this is this is not a liquidity issue.

Ted Stalick: Yeah. I would just add that our treaties, our reinsurance treaties allow for the inclusion of fair plan losses. So to the extent that we have, you know, 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. But, you know, even in worst-case scenarios, we can attach the fair plan losses to our reinsurance treaty, which we’ve done actually in previous massive wildfires. And on top of that, with these assessments, you know, we’re able to surcharge our policies policyholders to recoup those assessments. So part of the reasons why we bifurcated the Mercury’s losses from the Fair Plan losses is because we think that that’s separate and it’s something that is not gonna be as significant to the company because of the ability to recoup it under our reinsurance and recoup fair plan assessments.

Prem Nainani: And then so then what portion of fair plan loss do you think is Palisades versus Alpinina?

Ted Stalick: We don’t know. We don’t know that. But likely fair plan is you have more Palisades as likely, but we don’t know.

Prem Nainani: Alright. Cool. Thank you. Bye.

Victor Joseph: Just to add to that, yeah. This is Victor. I do wanna 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 Plan’s exposures is public, I think they came out yesterday saying that their exposure is about $4 billion. So I do want to kinda clear that up. If you read everything they’re saying, it’s clear in their statements.

Gabriel Tirador: And I would say that’s exposure not necessarily losses. Correct?

Victor Joseph: Yeah. Yeah. So potential. Before reinsurance.

Operator: Your next question comes from the line of Ian Holland, private investor. Please go ahead.

Ian Holland: Hey. I was one of the ask. So y’all say you have 800 structures that are total loss. Correct? And the numbers there are 650 HO3 and then 150 landlord and condo. Correct?

Gabriel Tirador: Correct. No. No. Go ahead. No. He left out renters.

Victor Joseph: Hundred fifty figure includes renters as well, which is obviously significantly lower. Yeah.

Gabriel Tirador: Did you hear that?

Ian Holland: Yes. Yes. I heard that. You were cutting out a little bit earlier. So if you know that, what’s the total insured losses for that segment of your book?

Victor Joseph: And that’s what do you mean by total insured loss? You mean total insured value? Do you mean the total value that’s exposed?

Ian Holland: Yes.

Victor Joseph: Yeah. As we mentioned earlier, we’re not reporting that figure. I would say that our estimated ultimate for total losses is based on the TIV and the percentage. The percentages are almost the entirety of the TIV. So that you know, that’s where our estimates come from.

Ian Holland: But so if you know that the structures are damaged, that means you’re gonna pay out these people most likely at the high end of the damage value. Correct?

Gabriel Tirador: That’s true.

Ian Holland: So why don’t you report that number on your press release?

Gabriel Tirador: Zach, this is pretty quite simple. We’re estimating pretax loss gross loss of $1.6 to $2 billion. We kinda shared how we went through the process of estimating that loss. We’re taking total insured value for total losses. And we’re, you know, taking a look at historic other wildfires and applying a range of percentages based on historic. And then we’re adding a process for partials and other, as Ted mentioned, we have some autos in there as well. And we come up with a range of $1.6 to $2 billion. And that’s what we did.

Ian Holland: But why are you using this historic values if you know the number of properties that you insure that have been destroyed? I mean, early in the call, you were talking about people on-site and satellite data. So why is it historical numbers?

Gabriel Tirador: The historic values are percentages of what you end up paying of total insured value. So, you know, it could be it could range from, you know, anywhere from 80% to 90% of your total insured value as an example. You ultimately pay out, but we’re using a range of what we ultimately pay out of total insured value. A percentage. To come up with the growth. A low end and a high end.

Ian Holland: So the total structure’s destroyed. What I’m hearing is that you don’t actually know the insured value of these structures that have been destroyed.

Gabriel Tirador: No. You’re not look. This is not complicated. Like, we have total insured values. Right? We have total insured values. We know what that number is. We have a range of what we estimate think we’re gonna pay of that total insured value based on previous wildfires. That simple. Let’s move on.

Ian Holland: Are you based it on previous wildfires?

Ted Stalick: Look. Look. Look. For example, on the Camp Fire or the North Bay Fire, we know that we paid out 80% to 90% of the total insured value on each total loss that was our ultimate loss. So if we had a million-dollar total insured value, the ultimate loss would say 90% of that on average. So our ultimate loss was $900,000 in that example. So that 90% we apply to the total insured value on the current event, on the Eden and Palisades Fire, and that’s how we get the number.

Gabriel Tirador: We’re gonna move on to the next question.

Ian Holland: Yeah. I mean, just

Operator: Your last question comes from the line of Dan David from Wolfpack Research. Please go ahead.

Dan David: Hi, gentlemen. Thank you for taking my question. I’ve obviously been concerned about what’s been going on with these wildfires and your company. Some of the things that really perplex me is why are you reporting far less of an average than your peers, less than 50% in many cases. If you really look at it. And what’s been disclosed. How is it that average of what? Average of what?

Gabriel Tirador: Well, a policy is enforced. I mean, you have you have, you know, how many policies in force? Right. Nine hundred and twenty-nine? Right? And you’re you’re averaging thirteen hundred and seventy versus Farmers, fourteen hundred and forty-five. And they have one third the PIFs Palisades. Look. I know you’re observing your industry. You should know.

Dan David: No. I do know. I know you’re upset because you shorted our stock. And, you know, it is what it is.

Gabriel Tirador: I’m not upset. I’m doing fine. I’m doing fine. I just want you guys to not drip it out here three months, four months later as you’re as you’re collecting higher premiums. Let’s just have an honest conversation here. Really?

Dan David: Well, I mean, let’s just have an honest conversation. How are you the best in class there? I mean, you’re doing historical numbers. Right? So you’re not boots on the ground. Did the fires just burn around your properties? I mean and and and not Allstate Travelers or Farmers?

Gabriel Tirador: I have no I yeah. The total the as far as total losses, we know that number exactly. We’re pretty close. I don’t know what you’re talking about. Are you saying that we’re hiding the number of total losses? Is that what you’re saying?

Dan David: Saying you’re underestimating. I mean, certainly, with the reinsurance, are I mean, with the subrogation, are you minusing that out already? Are you just, like, are you just, like, saying you’re gonna win in court for subrogation? And you’re minusing that out right now because you gotta pay that the whole time. Right?

Ted Stalick: We’ve gone through what the subrogation, you know, what that looks like. We’ve talked about the potential for

Dan David: Go through it again. Okay.

Gabriel Tirador: Okay. I’ve done it already. So

Dan David: No. Look. Yeah. If you’re not including the Eton fire, in your in your $2 billion number. Then the whole thing’s total bullshit. Right? Because you’ve gotta pay talking about it’s not included in the $2 billion?

Gabriel Tirador: No. You’re saying you’re you’re saying you’re minusing out some of your fault. Let’s end this call. You’re minuting out, Subrogate?

Operator: This is a question and answer session. I would now like to turn the conference back to Gabriel Tirador for any closing remarks. Sir, please go ahead.

Gabriel Tirador: Well, thank you very much for joining us today. That was interesting. Anyway, thank you for joining us today, and we’ll talk soon. Thank you.

Operator: This concludes today’s conference call. Thank you for attending today’s presentation. You may now disconnect.