Jeff Liaw
Co-Chief Executive Officer at Copart
Great. Thank you, and good evening, and thank you, everyone, for joining us today. We're pleased to report our results for the fourth quarter of fiscal 2023 and the conclusion of a strong fiscal year.
We continue our trend of generating excellent results for new and existing customers, of growing our business profitably and of reinvesting in the future prosperity of our customers and ourselves.
Today, I'll keep my comments brief focusing on some of the recurring themes that are most relevant to our business and to our customers. A year ago on this same call, we talked about the various dimensions of enterprise sustainability that we consider here at Copart, including environmental sustainability, given our critical role in the circular automotive economy; our financial sustainability in the form of our conservative capitalization; operational sustainability through our land stewardship and ownership strategy and global socioeconomic sustainability; and our providing mobility to developing economies around the world.
Today, I'll spend just a few minutes elaborating on a fifth dimension, which is the proactive role Copart plays in assisting communities in their recovery from catastrophic weather events. The 2023 hurricane season has been forecast to be "above normal" according coding to the National Oceanic and Atmospheric Administration, a division of the Department of Commerce. That forecast feels evergreen now year-to-year. So far in 2023, we've experienced 12 named storms, more than double the number we encountered last year.
Thankfully, for our insurance clients and their policyholders, the insurance loss impacts of the first hurricane to make landfall this year, Hurricane Idalia, were relatively modest in comparison to major storms in prior years. The threat of a more substantial event nonetheless remains in 2023 as many of the most significant storms in the past 20 years have occurred late in the season. Hurricane Ian, for example, the largest ever catastrophic event in our history, as measured by unit volume, did not itself make landfall until the 23rd of September last year. For any substantial storm likely to affect our insurance clients and their policyholders, we don't have the luxury of perfect visibility before we deploy resources, both in the moment and in the years prior.
Our response to Hurricane Idalia illustrates this reality. Though the landfall of the hurricanes eye was projected to be in the big band area of Florida, prevailing weather models showed a wide range of possible outcomes, including a potential initial landfall in the Tampa area and Eastwood progression thereafter through Florida, Georgia and Carolinas. Well before landfall, we deployed hundreds of team members, Copart-owned and third-party-owned tow trucks and Copart-owned loaders, telecommunications equipment and generators from around the country to the region.
We were prepared to immediately retrieve inventory store process titles for and sell many thousands of vehicles in the affected areas. And of course, our real estate investment and planning had begun years in advance, yielding more than 600 available acres of dedicated cat storage in Florida alone. For a given storm quarter or year, our investments in catastrophic readiness may appear to be overkill, but we recognize the responsibility we have to our customers and to the communities we serve together to optimize our readiness for such severe weather events.
I'll touch on a few additional themes for both our insurance and noninsurance businesses. But first, on the -- in the insurance universe. According to CCC, total loss frequency troughed at 17.1% in the second calendar quarter of 2022 and has subsequently rebounded to 18.8% in the second calendar quarter of 2023. This is down a bit sequentially from calendar quarter one into calendar quarter two, though this is the result of seasonality we've observed that same modest reduction in total loss frequency from the first quarter to the second quarter in each of the past eight years of CCC's data. Our expectation is the new and used vehicle prices are likely to stabilize or decrease in more swiftly than repair cost will. We believe this, in turn, should lead to a recovery in total loss frequency eventually surpassing pre-COVID levels as well.
In March 2023, Kelley Blue Book data indicated that average retail transaction values for new vehicles were below MSRP for the first time in nearly two years. In April 2023, this average transaction price was nearly $400 below MSRP compared to being $600 above just one year prior. The long-term drivers of total loss frequency, of course, remain unchanged. First, repairs are more expensive and less attractive due to increasing accident severity, vehicle complexity, labor costs and rental car costs; and two, salvage economics are more attractive because the growing economies in Central and South America, Africa and Eastern Europe depend on our damaged vehicles to provide the mobility they need.
Although our insurance -- U.S. insurance volumes continue to increase, up some 9% year-over-year, we estimate the total loss volumes continue to be relatively suppressed when compared to historical total loss frequency norms. As this inflationary environment persists, our insurance clients continue to experience hiring and retention challenges. And we, therefore, believe they'll lean still more heavily on trusted partners like Copart to provide additional services, including virtual inspection, loan payoff and title procurement services, among many others. Our insurance company clients continue to leverage and incorporate our image recognition tools and machine learning algorithms to enable better decision-making on total losses and importantly, faster decision-making.
As we've noted in the past, for a vehicle that will ultimately be totaled, insurance companies often nevertheless incurred literally thousands of dollars in towing, storage estimating, carry-down costs and appraiser labor, much of which could have been mitigated with streamlined decision-making. Our insurance companies continue to benefit from and appreciate the importance of our global marketplace in providing superior salvage returns to the insurance industry and minimizing their claims expense as a result.
Finally, a few comments on the noninsurance world as well. In the fourth quarter, we observed year-over-year growth of 13.8% in our Blue Car division, underscoring the realization of the benefits of our auction platform and our global member base as we serve the bank and finance fleet and rental segments as well. We likewise increased our dealer volume year-over-year by 5%. These dealers are unique as they serve, in some cases, as both sellers and buyers on our platform. In both cases, for the Blue Car and dealer sources of vehicles for Copart, we believe we are outperforming other wholesale channels for vehicles.
Lastly, in July of 2023, we received approval from the competition authorities in the U.K. to complete the merger of our acquisition of Hills Motor Company, which we had -- which we had completed in financial terms a year ago prior. Hills Motor Company is a leading vehicle dismantling business in the U.K., our insurance customers in the region have made clear to us that they prefer us to be partially -- to be partially vertically integrated in auction vehicles on their behalf while also directly satisfying some of their needs for recycled parts.
With that, I'll turn it over to our CFO, Leah Stearns, to provide additional commentary, to walk through some key statistics in our fourth quarter financial results before we open it up for questions. Leah?
