Andrew Bary
There's a chairman of a publicly traded insurer who makes the 94-year-old Warren Buffett look young. George Joseph, the founder and chairman of Los Angeles-based Mercury General, turns 103 Wednesday.
Joseph founded the auto insurer in 1961, four years before Buffett took control of Berkshire Hathaway, to take advantage of an odd feature in the way insurance was priced at the time. He likely is the oldest chairman of any sizable U.S. publicly traded company; Mercury is a member of the S&P SmallCap index with a market capitalization of $3.3 billion.
The oldest billionaire in the Forbes global tally, Joseph owns a 35% stake worth $1.1 billion.
He appears to be still active in the business, co-authoring Mercury's annual shareholder letter with longtime CEO Gabriel Tirador and drawing total compensation of $1.6 million last year. Joseph declined to talk to Barron's, and the company wouldn't comment on Joseph's current work routine.
Born and raised in West Virginia, Joseph is a World War II combat veteran, having volunteered for the military in the spring of 1941, before the Japanese attack on Pearl Harbor in December that year. He served in the U.S. Air Force during the war as a navigator on North African-based B-17s in the Mediterranean theater.
Joseph went to Harvard on the GI Bill, moved to Los Angeles, and worked in the insurance industry. He saw an opportunity to found Mercury General because auto insurers at the time charged policyholders the same rate, regardless of driving records, according to his bio on the Mercury website.
Like Buffett, Joseph is old school. The company has little debt and has focused on maintaining low operating costs and rooting out insurance fraud. Joseph used to personally go through claim files for evidence of fraud, such as new policyholders seeking payment for pre-existing damage to their cars.
And like Berkshire, the low-profile Mercury doesn't hold quarterly conference calls and has limited communication with shareholders. There is hardly any analyst coverage of the company.
The company, which went public in 1985, has long emphasized dividends over share repurchases. It had raised its dividend for every year from 1985 to 2022, when the payout was cut in half to $1.27 annually after the company suffered losses that year. The payout now stands at that level.
Barron's has written on Mercury General, including articles in 2003 and 2020. "I think dividends are important," Joseph told Barron's in 2003 . "The best indicator that you're making real money and not manufacturing profit from accounting games is the ability to pay a dividend and increase it."
Mercury stock, now trading around $58, is up 55% this year, though it is little changed over the past 10 years. The dividend yield is 2%. The shares have advanced recently along with the stocks of other auto insurers, such as Allstate and Progressive, that are benefiting from much higher auto insurance prices.
Although Mercury General also offers homeowners insurance, it has long had a focus on auto coverage in California. That market has historically been difficult for insurers due to consumer-friendly regulators with an elected commissioner that tends to be stingy with rate increases.
This year, however, the commission allowed a 20% boost to Mercury's auto prices. That, together with two increases in 2023, has restored profitability.
The company earned nearly $2 a share in the first half of 2024, against a similarly sized loss in the same period of 2023. In the annual letter earlier this year, Joseph and Tirador wrote that while operating results improved in 2023, "we have more work to do."
Raymond James analyst Greg Peters is upbeat on the stock. His target for the price is $80.
"We still believe there is further upside (in the stock) due in part to the near-term outlook for historically strong top-line growth as a result of recent rate increases, improving margins, and increasing NII," he wrote after the earnings report in early August, referring to net interest income.
Joseph's ex-wife Gloria Joseph, 100, is Mercury's second-largest shareholder at 16.5%.
Some investors had thought that Mercury might be sold after Joseph's death given his role as founder and controlling shareholder. One potential buyer is Progressive, an industry leader with an undersized presence in California. Mercury is a top 10 auto insurer in California based on annual premiums.
But Joseph may be positioning his son, Victor Joseph, 37, to run the company. Victor Joseph has risen through the ranks at Mercury in the past 15 years and was named president and chief operating officer earlier this year.
Victor Joseph is the son of George Joseph and Vicky Joseph, George's current wife. All three are on the nine-member board of directors.
Experts say that work can improve life expectancy, and that may be a contributor to George Joseph's longevity. It may also tell us something about Buffett, who has run Berkshire for nearly 60 years.
Write to Andrew Bary at andrew.bary@barrons.com
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September 11, 2024 17:17 ET (21:17 GMT)
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