But the personal lines group was better reserved at the start of this year, so there is less balance sheet strain. Also, goals of cross-selling are driving the need to advertise and potentially lose money short term in order to control the customer. At the end of the day, the auto industry is setting itself up to need substantial corrective rate action, and as rate requests increase, that will drive regulatory concerns. Those factors are driven by markets, product differentiation, strength of the balance sheet, strength of management, and discipline, because discipline, more than anything, is what is going to drive companies in this kind of environment. What I ve been looking at today more closely when valuing companies is their leverage toward improvement.
Some companies have better earnings leverage toward commercial price increases than others.
I am probably one of the only analysts who is recommending it right now. I just upgraded the stock after I visited the company about a month ago. This is not a sexy story, but they are doing the right things today. They ve remained disciplined in a regional market that was until now supported in part by cheap reinsurance. My view is that their earnings decline is leveling off.