is raising itsinsurance rates again after recording $40 million of unfavorable development inthe first quarter, President and CEO Gabriel Tirador said during a conference callto discuss earnings.
The autoinsurer hiked prices atsubsidiary Mercury Insurance Co.by 5% in late March and recently received regulatory approval for a 6.9% increaseon coverage sold by its other unit, CaliforniaAutomobile Insurance Co. The rising rates come on top of similar in 2015 of 6.4% and 6.9%at Mercury Insurance and California Auto, respectively.
MercuryGeneral is boosting prices to offset worse-than-expected claims experience fromits auto bodily injury policies in California and Florida, Tirador said. The unfavorabledevelopment occurred across accident years 2012 through 2015.
"Wecertainly recognize that we can't continue to have a combined ratio at this level,"he said on the call, adding that the higher rates should start to have an impacton Mercury General's bottom line by the third quarter. "We think that our prospectsgoing forward are going to be much better."
The California-basedcompany also recorded $8.0 million of catastrophe losses stemming mostly from claimstied to hailstorms in Texas and rain in California. Tirador said worsening loss-costtrends and a higher new business loss ratio hurt its earnings as well.
MercuryGeneral, which saw its first-quarter operating income drop 78.4% year over year,is already preparing to request another rate hike for California Auto. The companyis still considering whether to do the same at Mercury Insurance.
"Anytime you have results that are not favorable, yes, that does give you more supportto raise rates," Tirador said.