Prem Nainani's questions to Mercury General Corp (MCY) leadership • Q4 2024
Question
Prem Nainani of Plomado Advisors asked if the reinsurance treaty defers to PCS for event classification, sought confirmation on the subrogation cash flow timing, and questioned why Mercury lacks a firm view on FAIR plan damages when peers seem to have one. He also probed whether the gross loss estimate could rise and the immediate capital impact of FAIR plan assessments.
Answer
CEO Gabriel Tirador confirmed the treaty defers to PCS for event classification and explained the gross loss range of $1.6B to $2.0B was provided to reflect various assumptions around losses and subrogation. He acknowledged the range could potentially be exceeded but felt it captured the likely outcomes. CFO Theodore Stalick added that FAIR plan losses are less significant due to the ability to cede them to their reinsurance treaty and recoup assessments via policyholder surcharges, mitigating the capital impact.